A senior Republican on the House Financial Services Committee on October 5, 2021, accused the SEC of ignoring a GOP request for documents related to the commission’s June decision to dismiss PCAOB Chairman William Duhnke and seek candidates for all five board seats.
In a testy exchange with SEC Chair Gary Gensler during a committee hearing, Rep. Bill Huizenga said the SEC chief has not yet given “a satisfactory explanation for removing Mr. Duhnke or your overhaul of the board.”
“Frankly, our investigation hasn’t turned up any good reason for those actions,” the Michigan Republican said. “All of this I believe creates the appearance that you fired Mr. Duhnke to appease partisan groups on the left and people like Sens. [Elizabeth] Warren and [Bernie] Sanders.”
Huizenga is the ranking member of the Subcommittee on Investor Protection, Entrepreneurship and Capital Markets.
Warren and Sanders in late May called for a “clean slate” at the PCAOB, citing a decline in enforcement actions at the board, stagnating advisory groups, and the weakening of auditor independence standards, among other grievances. (See Sens. Warren, Sanders Call for ‘Clean Slate’ at Audit Regulator in the May 28, 2021, edition of Accounting and Compliance.)
In announcing Duhnke’s firing, Gensler named PCAOB member Duane DesParte to serve as acting chair as the commission worked to select new members. Days after Duhnke’s removal, House Financial Services Committee Republicans began an investigation and demanded the SEC and PCAOB preserve documents related to the action. (See Appointment Process For PCAOB Seats Begins, But Republicans Seek to Investigate Removal of Trump-era Board Members in the June 10, 2021, edition of ACA.)
Gensler, during the hearing, cited the SEC’s authority under the 2010 Supreme Court Ruling in Free Enterprise Fund v. PCAOB that allowed the commission to remove PCAOB members at will. He said his predecessor, Jay Clayton, invoked that same authority when Clayton swept out the board in 2017 and installed Duhnke, who had served as a top aide to Sen. Richard Shelby, an Alabama Republican.
“We review [the PCAOB’s] rules, we review its standards, and yes, as Chair Clayton did, we can remove the board,” Gensler told Huizenga.
Huizenga went on to challenge whether the SEC reviews all materials put out by the PCAOB, including press releases. Gensler said he would be happy to talk with Huizenga’s staff to better understand the question but said “I don’t think it’s press release by press release.”
Huizenga added that he had just introduced a bill, the Streamlining Public Company Accounting Oversight Act, that would eliminate the PCAOB and fold it into the SEC. The bill echoes an aborted cost-cutting proposal by the Trump Administration in early 2020 that would have consolidated the PCAOB’s functions with the commission. (See Trump Budget Proposes to Merge SEC and PCAOB in the February 11, 2020, edition of ACA.)
“That might get at what you are talking about so we can just be honest with everybody that it’s a political appointment and a political organization,” Huizenga said.
This article originally appeared in the October 06, 2021 edition of Accounting & Compliance Alert, available on Checkpoint.
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