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From Securities Regulation Daily, June 7, 2018

New Board members ring in PCAOB advisory group meeting

By Amanda Maine, J.D.

The five new members of the PCAOB kicked off their first Standing Advisory Group (SAG) meeting with a discussion of the ongoing process of developing the Board’s strategic plan for 2019 as well as urging feedback and comments from SAG members on the Board’s priorities and agenda. The SAG held its last meeting in November 2017; since then, an entirely new Board has been appointed and sworn in.

Strategic plan in the works. Chairman William Duhnke discussed the PCAOB’s strategic planning process, which he had also outlined in a recent speech at the University of Kansas Auditing Symposium. The Board’s strategic planning for 2019 has involved both internal and external outreach. According to Duhnke, the process is nearly two-thirds complete. It should be wrapped up in July or August and will then be published for comment. Duhnke said that so far, the results of the surveys used in the Board’s strategic planning process have been very encouraging with strong participation.

Board member Kathleen Hamm said that as part of the strategic planning process’ surveys, both internally and one-on-one interviews with stakeholders, one theme that has emerged is that the Board is not as accessible as the respondents would prefer. Hamm said the Board is committed to becoming more accessible. She said she is particularly interested in cybersecurity and emerging technologies and what audit firms are doing to deploy these technologies.

Jay Brown, a former SAG member now serving as a member of the PCAOB, said that when he was on the SAG, he didn’t know what Board members did with comments received from the SAG. Now as a member of the Board, he knows that the members do discuss comments from SAG members all the time, whether they were made in a meeting or sent in a letter. The Board can do a better job about how they communicate their discussions about SAG member feedback, he added.

Board member James Kaiser said that the Board is trying to give feedback on a more proactive basis instead of after-the-fact. He said that as an example, the Board can look to the SEC’s immediate feedback to preparers regarding the new tax law. Hamm echoed this sentiment, stating that Board members are looking at ways to be more preventative and less focused on detection and remediation.

Board member Duane DesParte said he hopes the PCAOB can be viewed more as a resource about what best practices are. He explained that some firms have told the PCAOB that it’s a little bit more of a "gotcha relationship" as opposed to a resource where they can work together to drive audit quality.

Investor outreach. A number of SAG members urged the Board to reach out more to investors. Peter Clapman, senior advisor at CamberView Partners, said that investors’ stake in the work of the PCAOB has been largely unknown to investors. The SAG and the Board are doing work that matters to investors, but investors don’t know what their stake is in the organization, he advised. Communications about audit committees and their relevance to investors has gone under the radar, he said.

Brown agreed that the Board should make its work more accessible to investors. He noted that the Board received a lot of feedback from investors on the Board’s changes to the auditor’s reporting model, but the comment letters on the Board’s proposal regarding the work of specialists included only two letters from investors. The Board should be able to message better to encourage feedback from stakeholders, including investors, Brown concurred.

Human capital. Brandon Rees of the AFL-CIO noted that there has been a significant turnover at the PCAOB, not only with Board members but also with senior staff, including the departures of the directors of the Division of Inspections and the Division of Enforcement, as well as the Board’s chief auditor. He inquired about how the PCAOB is focused on its own human capital and finding qualified people to carry out its mission.

Hamm advised that the PCAOB has a deep bench of subject matter experts and are blessed to have it at all levels. Kaiser assured that the Board is very confident of the people that have been placed in acting roles who will continue the PCAOB’s mission in the interim while it looks both inside and outside the PCAOB for permanent replacements.

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