Shakeup at the PCAOB: SEC removes Duhnke, plans new board members

The Securities and Exchange Commission abruptly removed William Duhnke as chairman of the Public Company Accounting Oversight Board on Friday. As part of the shakeup, PCAOB board member Duane DesParte will become acting chair, but the SEC plans to replace the entire slate of all five board members.

The SEC’s new chair, Gary Gensler, said the move would better protect investors. “The PCAOB has an opportunity to live up to Congress’s vision in the Sarbanes-Oxley Act,” Gensler said in a statement. “I look forward to working with my fellow commissioners, Acting Chair DesParte, and the staff of the PCAOB to set it on a path to better protect investors by ensuring that public company audits are informative, accurate, and independent.”

The PCAOB has come under criticism for ending meetings of its Investor Advisory Group and Standing Advisory Group and holding few open meetings during Duhnke’s tenure. Duhnke became chairman in January 2018 and, over the next two years, the rest of the other board members and much of the top staff at the PCAOB were gone, including a board member who was replaced by a White House aide (see story). The PCAOB also overhauled its standard-setting agenda, strategic plan, and audit firm inspection process in keeping with the deregulatory agenda of the Trump administration and the former chair of the SEC, Jay Clayton. A PCAOB spokesperson referred requests for comment to the SEC.

Last month, Sen. Elizabeth Warren, D-Massachusetts, and Bernie Sanders, I-Vermont, asked Gensler to replace the PCAOB board, according to Bloomberg News, saying it had been weakened under the Trump administration. The PCAOB was also sued earlier this year for wrongful termination by former PCAOB chief administration officer Sue Lee, who claimed Duhnke discriminated against her Chinese ethnicity and used terms like “kung flu” and the “Chinese flu” in front of her and that he wanted to replace liberals at the PCAOB with Republicans, according to the Going Concern blog. The PCAOB filed a counterclaim against her lawsuit denying the allegations.

The new acting chair, DesParte, a CPA, was appointed as a member of the PCAOB by the SEC in December 2017 and joined the board in April 2018 after retiring from the energy company, Exelon, where he was corporate controller and fulfilled other financial roles there for 15 years after an 18-year career in audit and assurance.

The SEC also said Friday it intends to seek candidates to fill all five board positions on the PCAOB. It has directed the SEC’s Office of the Chief Accountant to start the process for soliciting new applications. More information about that process will be released in the weeks ahead.