Public Company Accounting Oversight Board (PCAOB) member Christina Ho has hit back at Democratic Senators Elizabeth Warren and Sheldon Whitehouse for playing politics when they sent a scathing letter on October 9 to board Chair Erica Williams for what they see as a failure of the PCAOB after 46% of audits inspected in 2023 were found to be deficient, an increase from 40% in 2022, 34% in 2021, and 29% in 2020.
Ho took issue with the senators’ letter that referenced her September speech when they wrote that she “appears to be focused on downplaying and misdirecting attention from these atrocious findings.”
“Last month, Board Member Christina Ho denied that the inspection results were a problem, instead claiming that ‘there is another side to the story,’ and that ‘PCAOB has become overzealous in its enforcement program,” falsely claiming that the inspection results ‘lump[] all deficiencies together without a qualitative assessment of their severity,’” the senators wrote.
In particular, Ho criticized the letter for containing “a thinly veiled threat to me (and others) by noting how Senator Warren had successfully urged the Securities and Exchange Commission (SEC) in 2021 “to remove and replace all members of the PCAOB.”
The SEC as capital markets regulator oversees the PCAOB, and the commission appoints board members. About two months into his tenure, SEC Chair Gary Gensler in June 2021 fired then-PCAOB chairman William Duhnke for not only being too lenient on the profession that the regulator oversees but also for accusations by staff members of his alleged abusive management practices. Gensler then replaced all board members except one for continuity in November.
“The fact that the Senators decided to single me out is troubling because I believe they are trying to stifle me from expressing views inconsistent with their false narrative,” Ho wrote on October 17, 2024, in an impassioned opinion piece on her LinkedIn page, titled Senators, why are you persecuting me?
Ho was also the lone dissent when the PCAOB voted to adopt a new quality control standard. Two Republican SEC commissioners went against the majority of commissioners who approved the standard in September.
“U.S. Senators have tremendous influence. Senators Warren and Whitehouse made it clear in their letter to the PCAOB that Senator Warren got the former PCAOB Board fired,” Ho said. “Is this a threat for simply using my voice to speak the truth in the name of investor protection?”
Ho said she wants to explain “why the Senators’ alarmism is unwarranted” and defend herself, citing her 30 plus years of professional experience.
She noted that the PCAOB—in inspection reports—notes that an identified deficiency “does not necessarily mean that issuer’s financial statements are materially misstated or that undisclosed material weaknesses in internal controls over financial reporting (ICFR) exist.”
Ho pointed out on LinkedIn, as well as in her September speech, that audits inspected in 2023 with incorrect opinions were less than 5%, which she believes presents a more accurate state of audit quality.
“To be clear, I am not saying that a 46% deficiency rate or a 5% incorrect audit opinion rate is acceptable, it’s not,” Ho said.
“What I am saying is that when you put the 46% figure cited by PCAOB and the Senators into context, the sky is not falling, and for the Senators to state that investors ‘face a coin flip when it comes to whether they should believe and trust the results of public companies’ audits,’ is unfair and unwarranted.”
Then Ho, who previously worked at the Treasury Department, said she has been tirelessly promoting “data-driven government and evidence-based policymaking, because that is how we build trust in government.”
In her view, innovation drives audit quality, not regulation through enforcement.
This is a similar criticism that the crypto industry has against SEC Chair Gensler. For his part, Gensler says that many crypto companies are dealing with crypto assets that function like a security, and he believes that they should not be exempted from complying with the securities laws just because they don’t like it.
In the auditing profession, “fear might extract compliance, but it will not achieve audit quality,” Ho said.
She said that it is important for her to express her views without any fear of retribution as an immigrant and a naturalized U.S. citizen.
“Like many women of color, it has taken me a long time to be able to use my voice to express my views,” she said. “As a public servant who contributed significantly to the advancement of federal financial transparency and accountability, I have earned the trust of many people in governments, industries, academia, and civil societies.” And at the PCAOB, she said she has worked to advance the board’s mission of investor protection.
Then Ho unleashed a torrent of criticism against Warren and Whitehouse.
“Is there anything more abusive than U.S. Senators’ thinly veiled threat to take away the jobs of public servants just because they have different perspectives?” Ho asked. “Is there anything more hypocritical than Senators who claim to serve underprivileged and underrepresented populations, but do not think twice about threatening a woman of color for simply doing what she believes is right?”
This article originally appeared in the October 21, 2024, edition of Accounting & Compliance Alert, available on Checkpoint.
Get all the latest tax, accounting, audit, and corporate finance news with Checkpoint Edge. Sign up for a free 7-day trial today.
