The U.S. Securities and Exchange Commission (SEC) on Friday said it had removed the head of the oversight board that sets standards for audits of public companies and planned to replace the rest of the board in due course.
The SEC said in a statement that it had voted to remove William Duhnke III as chair of the Public Company Accounting Oversight Board (PCAOB), a role he has held since January 2018, effective Friday. The other four members of the board will stay on, but the SEC — which oversees the accounting watchdog — is soliciting resumes for those roles.
Duhnke’s ouster is a warning shot by the new SEC chair Gary Gensler, who took the helm at the markets regulator in April. The PCAOB, which was created by the 2002 Sarbanes-Oxley Act following major accounting scandals, has long been criticized by Democrats for being toothless.
The PCAOB has also come under criticism by hawks who wanted it to take a tougher stance on Chinese auditors of U.S.-listed Chinese companies which have generally evaded U.S. oversight.
“The PCAOB has an opportunity to live up to Congress’s vision in the Sarbanes-Oxley Act,” Gensler said in the statement.
Democratic Senator Elizabeth Warren and Independent Senator Bernie Sanders last month pressed the SEC to immediately replace the board, which they said has fallen down on its job of overseeing audit firms meant to keep publicly-traded companies in check.
While the SEC did not disclose the breakdown of the vote, Hester Peirce and Elad Roisman, the Republican members of the five-person commission, said in a statement that Duhnke’s ousting established a “troubling precedent.”
Former SEC chair Jay Clayton overhauled the PCAOB in 2017, appointing five new members including Duhnke, after the board’s staff leaked confidential information to one of the audit firms it oversees.
Duane DesParte, who also joined the board in 2018, will serve as acting chair, the SEC said.