PCAOB Board to Be Sacked

SEC chairman Paul Atkins is moving to replace the entire board of the Public Company Accounting Oversight Board, one week after Atkins muscled out PCAOB chairman Erica Williams years before her term was due to expire.

Atkins disclosed his plans in a statement quietly issued Wednesday night, calling for candidates for all five PCOAB board seats. His statement didn’t include any timeline for when new board members will be announced, although interested parties must submit their applications by Aug. 25. Nor is it clear whether Atkins might keep any existing PCAOB board members on the job if they re-apply.

The PCAOB oversees the auditing industry, so as a practical matter Atkins’ power play means two things. First, forget about any substantive business from the PCAOB any time soon, such as adopting new standards for the audit industry or imposing significant enforcement actions against audit firms; that’s going to wait until the new board is in place. 

Second, when those new board members do take office, expect audit industry oversight to go in a very different direction than what we saw during the Biden Administration. Presumably this will mean less enforcement, easier inspections, and a general reluctance to adopt new audit standards, because those are the marching orders for all Trump Administration agencies.

Anyway, for anyone keeping score: Atkins fired Williams last week, shortly after Republicans in Congress dropped plans to abolish the PCAOB entirely. He then named board member George Botic as interim chair, which was a reasonable move; Botic had previously been a long-time employee at the PCAOB before joining the board in 2023. 

Now Atkins wants to remake the PCAOB to his liking. Legally he has the right to do that, and this won’t even be the first PCAOB deck-clearing that we’ve seen; the Biden Administration did the same in 2021 — although that reshuffle was spurred by allegations of long-running and bonkers dysfunction at the agency. This reshuffle seems driven by the Trumpist mantra that all things tied to the Biden era are inherently bad, and therefore must be excised immediately.

For anyone crazy enough to want one of these open seats, each one runs for a five-year term. They follow a staggered schedule, so the first seat’s term will expire in October 2026, the second in October 2027, and so forth through 2030. All board members are also eligible for reappointment to a second five-year term. 

The Sarbanes-Oxley Act says that PCAOB Board members be “appointed from among prominent individuals of integrity and reputation,” a stipulation that does make me wonder about several prior PCAOB board choices. Applicants do not, however, need to be audit or accounting professionals. Indeed, the law even requires that at least three of the five board members not be certified public accountants. The chairman of the board cannot have been a practicing CPA within the last five years.

So if presiding over cuts to budgets and personnel is your thing, while your bosses at the SEC cherry-pick all the sexy enforcement actions that make headlines and second-guess every idea you might have for audit industry oversight — go ahead, apply! These positions do pay well, but clearly, job security is not guaranteed.