The PCAOB on January 31, 2022, said that it is forming two advisory groups: the Investor Advisory Group (IAG) and the Standards and Emerging Issues Advisory Group (SEIAG), which replaces the Standards Advisory Group (SAG) established in March 2021 but never took off.
At the same time, the board is seeking candidates to serve on the group.
The deadline for comment on the panels’ structure and nominations to serve on the groups is February 28.
Nominations are open to new individuals as well as those who served on the board’s previous advisory groups. The board had an IAG and a Standing Advisory group (old SAG).
The PCAOB said that it expects to appoint members in early spring.
This first public order of business for the new PCAOB leadership responds to strong criticisms about the board’s decision to abolish previous advisory panels and set up the SAG under then-chairman William Duhnke’s leadership last year.
Investors said that the new SAG’s charter would minimize investor voice while at the same time give an outsize voice to the auditing profession, among other problems. (As PCAOB Seeks New Adviser Nominations, Some Criticize Advisory Group’s Charter in the April 15, 2021, edition of Accounting & Compliance Alert.)
After SEC Chair Gary Gensler removed Duhnke in June, the PCAOB hit the brakes on establishing the SAG after soliciting candidates to serve on the new advisory panel. The securities commission, which oversees the audit regulatory board, named four new PCAOB members in November who are now all seated. Duane DesParte, who was appointed by Gensler’s predecessor Jay Clayton, is the lone holdover.
The PCAOB staff is contacting individuals who applied to be on the SAG to determine whether they wish to be considered to serve on the new panels being created.
“The effectiveness of our oversight depends on robust dialogue with key stakeholders, including the investor community, audit committee members, preparers and auditors of financial statements, and academics, among others” said PCAOB Chair Erica Williams in a statement. “Building on the success of the PCAOB’s past advisory groups, the IAG and SEIAG will provide us with opportunities to obtain key views and insights from regular engagement with stakeholders.”
Investor Advisory Group
The IAG will advise the PCAOB on its mission to supervise the audits of public companies and broker-dealers that are regulated by the SEC.
The board will select up to 18 voting members in its sole discretion based on nominations received from any person or organization. And the IAG will meet publicly at least twice a year. Additional ad hoc public or private meetings may be held. Non-public break-out sessions can be held during meetings.
An SEC official will attend the meetings but will not have voting rights. Other non-voting attendees may be designated for particular meetings.
To make sure there is communication between the IAG and the SEIAG, one or more IAG members will also serve as SEIAG members.
The board is looking for individuals with expertise or experience in investing in public companies, such as institutional ore retail investors, pension fund managers, investor advocates, academics, or other relevant expertise.
Membership will be for a two-year term. To promote continuity, however, the PCAOB said that 50 percent of initial members will be appointed for a three-year term. Members cannot serve more than six consecutive years.
An IAG member and either a board member or staff will serve as co-chairs of the advisory panel. IAG will elect the member co-chair, and the board will appoint the board member or staff as the other co-chair.
The co-chairs, based on input from the board, the staff, and IAG members, will develop meeting agendas.
The advisory committee will select subcommittee or task force chairs as necessary.
Standards and Emerging Issues Advisory Group
The SEIAG will advise the PCAOB on existing, proposed, and potential news standards. The board could also request input on matters other than standards, including emerging audit issues.
It will have up to 24 voting members, and the board is looking for individuals with the following expertise:
- accounting, including financial reporting;
- corporate finance;
- corporate governance, including audit committees or boards of directors;
- investing in public companies; and
- other areas that the board deems relevant.
The terms of the membership will be the same as the IAG’s: a two-year term with 50 percent of initial members who will have a three-year term for continuity. Members will be limited to six consecutive years.
PCAOB chief auditor will serve as the chair. The board is currently looking to name the chief auditor. In the meantime, Barbara Vanich has been serving as acting chief auditor since Megan Zietsman was elevated to serve as a board member in November 2020. Zietsman stepped down last year.
If it chooses to do so, the board can appoint a SEIAG co-chair to serve alongside the board’s chief auditor.
The SEIAG will select subcommittee/task force chairs as necessary.
The new advisory group will also hold at least two public meetings; additional ad hoc public or non-public meetings may be convened.
As for meeting agendas, they will be developed by the chair or co-chairs following input from the board, the staff, and the members. The agenda must be approved by the board.
One representative of each of the SEC, the FASB, and the International Auditing and Assurance Standards Board (IAASB) will attend the meetings as non-voting members.
Other non-voting attendees may be designated for particular meetings.
Individuals who want to nominate themselves should fill out Nominee Form.
Those who want to nominate others should fill out Nominator Form.
This article originally appeared in the February 2, 2022 edition of Accounting & Compliance Alert, available on Checkpoint.
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