PCAOB Chairman McDonough To Resign
“I came to the PCAOB in June 2003 to help it fulfill the great responsibilities assigned to it by the Sarbanes-Oxley Act to protect investors in U.S. public companies by overseeing the accounting firms that audit these companies,” McDonough said in the statement announcing his resignation. “The PCAOB is now a vibrant institution with an outstanding Board and a superb, highly dedicated staff of almost 400 people. The supervisory process that we have adopted is working well, implemented by the adoption of auditing standards that make sense and an inspection process that helps auditors realize they must improve their practices to win back the support of the public. The firms know that public confidence is won most quickly and effectively through their own efforts, helped and prodded when necessary by the PCAOB. Productive working relationships are being established as well with a variety of other countries for cooperation in dealing with overseas accounting firms auditing non-U.S. issuers of securities in American markets. I have full confidence that the team of which I have felt honored to be part will rise to ever greater heights.”
The PCAOB performed the first independent inspections of auditing firms in American history as well as approving and implementing new standards placing strict limits on auditor conflicts of interest under McDonough’s the Washington Post reports. Although the board took its first disciplinary actions four months ago, according to Bloomberg, it has also clashed with the SEC, been the target of complaints form the business community as audit prices skyrocketed and is still trying to define its role in the governing and regulating of the nation’s public companies.
“He’s put in place the foundations of the regulatory system of the accounting profession,” Michael R. Young, a lawyer and accounting specialist at Wilkie Farr & Gallagher LLP in New York told Bloomberg. “He basically walked into an empty office building, and he leaves not only with furniture there but with a fully functioning staff.”
“It has been an honor to work with Chairman McDonough over the past two years on matters of extreme importance not only to auditors but also to the integrity of our securities markets,” outgoing Chief Accountant Donald Nicolaisen agrees in a statement regarding McDonough’s resignation. “The credibility that investors place in companies’ financial statements depends in large part on the work, ethics and independence of the men and women who perform a critical examination of those statements during the audit process. When Chairman McDonough took office investor confidence in that audit process was at its low ebb and he has led the efforts to establish a regulatory system that assures investors that auditors place investors interests above all other interests or concerns.”
Vacancies in two top accounting positions offer SEC Chairman a unique opportunity to put his mark on the agency. It could also mark a turning point in the regulation public companies and the firms that audit them.
“This could mean some major changes in how auditing standards are developed and applied over the next several years and gives the new commission majority an unexpected opportunity to take a fresh look at these issues,” John F. Olson, a partner at Gibson, Dunn & Crutcher LLP told the Washington Post.
Sweeping changes seem unlikely, however. In his statement regarding the resignation, Chairman Cox notes “Bill McDonough has done an outstanding job as the Chairman of the PCAOB…[h]e has provided superb leadership at a critical time to our nation’s investors, capital markets, and public companies, as well as the accounting firms that audit them...[f]or years to come, we will continue to build on his work for investors and for all who benefit from healthy capital markets.”
Regarding his own plans for the future, McDonough said only “I have a wide range of interests in corporate governance, finance and international affairs and will explore one or a variety of activities in those fields; I enjoy perfect health and have not the slightest interest in retiring, now or ever.”
According to the PCAOB statement, McDonough, who is 71, will also continue serving as Chairman of the Investments Committee of the United Nations Joint Staff Pension Fund, Chairman of the Review Group on the Organization of Financial Sector and Capital Markets at the International Monetary Fund and a member of the Board of the New York Philharmonic.