Recently, SEC chair Paul Atkins made headlines by asking PCAOB chair Erica Williams to step down. The move came after the audit watchdog narrowly survived being dissolved and folded into the SEC via the budget megabill.
But Williams’s ouster shouldn’t have come as much of a surprise, Richard Chambers, former CEO of the Institute of Internal Auditors, and current senior internal audit advisor for risk management software company AuditBoard, told CFO Brew.
“I think the only thing that surprised me is not that the PCAOB chair is stepping down. It’s how long it’s taken,” he said.
In the previous two presidential administrations, SEC heads have asked not only the chairs of the PCAOB but the organization’s entire board to resign. That’s happened, in part, for political reasons. SEC chairs, who oversee the PCAOB, want the audit board to reflect the regulatory philosophy of the president who appointed them, Chambers said.
“Whether it’s good or not,” he said, “we have entered this era where the regulatory philosophy shifts rather dramatically from administration to administration.”
The PCAOB’s checkered history: But upheaval at the PCAOB over the past decade might not be entirely politically motivated. The audit board has had its share of scandals. In 2017, for instance, current and former PCAOB employees leaked information about upcoming audit investigations to KPMG. When word got out, a PCAOB inspector and a KPMG partner were convicted of fraud, and five KPMG partners, including the head of its audit practice, were fired. Then-SEC chair Jay Clayton requested that PCAOB chair James Doty and the entire board be replaced in the wake of the scandal.
William Duhnke III became PCAOB chair in 2018 with a mandate to help restore the organization’s reputation. But an SEC report alleged that Duhnke created a chilling atmosphere at the PCAOB. Whistleblowers claimed he fired senior staff who disagreed with him, and his critics accused him of taking a weak stance on enforcement. Former SEC head Gary Gensler dismissed Duhnke and the PCAOB board in June 2021. He did so, he said at a Wall Street Journal event, because he believed the PCAOB wasn’t setting or enforcing standards rigorously enough, and wasn’t working closely enough with investors.
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What about Williams? Williams’s tenure wasn’t marked by any misconduct. But she took a more assertive approach to regulation and enforcement, levying record fines of $35.5 million in 2024. Atkins, on the other hand, seems to favor deregulation. On his watch, the SEC has dropped enforcement actions against several companies, particularly those in the crypto space.
With Williams out, the PCAOB will be likely to lean in a more deregulatory direction, Chambers predicted. “I don’t think you’re going to see a lot of new regulations proposed” or “the kind of aggressive approach to inspections and sanctions” that Williams took, he said. Atkins also may pursue further changes to the PCAOB, such as cutting its staff or budget or reducing board members’ salaries, Bloomberg Tax suggested.
Chambers doesn’t think the audit watchdog will go away entirely (“I’m not sure there’s a lot of political will in Washington to dissolve the PCAOB,” he said), but said he wouldn’t be surprised to see more changes to its board.
“So the question is: Is this the end of the change in PCAOB leadership,” he mused, “or is it the beginning?”