Responding to the PCAOB in its State of Flux

Given the current landscape at the PCAOB, firms must act more quickly on remedial actions in 2021 than in the past to ensure the remediation staff concludes that the remedial actions are sufficient. 

Echoing the SEC’s December 2017 action to replace the PCAOB’s five-member board with new members, on June 4, 2021, the SEC removed the PCAOB’s chairman and announced it would replace the remaining board members.

While the SEC has sought nominations for new Board members, when those members will take office is anyone’s guess. Until then, three existing members remain at the Board. 

What does this mean for your registered firm? Not much, at least in the short term. The PCAOB continues its inspection and enforcement activity, but its standard-setting activity may not progress until a new Board is in place. But there are actions registered firms should take during this state of flux at the PCAOB.  

You’ve likely noticed that the issuance of both of inspection reports and enforcement orders has decreased significantly over the past three years. Since peaking at 344 inspection reports in 2011, the PCAOB’s pace for issuing inspection reports slowed to a trickle of 46 reports in 2020.  And since the Sarbanes-Oxley Act dictates the timing of the inspection activity but not the issuance of reports from those inspections, it is clear the PCAOB has a significant backlog of reports to issue from inspections conducted in 2019, 2020, and 2021 to date. 

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