Deconstructing the PCAOB: Using organizational economics to assess the state of a regulator

dc.contributor.author McKenna, Francine
dc.contributor.author Pevzner, Mikhail
dc.contributor.author Sheneman, Amy
dc.contributor.author Zach, Tzachi
dc.date.accessioned 2022-10-20T19:39:54Z
dc.date.available 2022-10-20T19:39:54Z
dc.date.issued 2022
dc.description.abstract Using the principles of organizational economics in this study we assess the quality of the organizational architecture of the Public Companies Accounting Oversight Board (PCAOB). In particular, we use the Four Pillar Framework developed in Brickley et al. (2000) to understand why—according to the SEC’s Chairman Gensler and other stakeholders—the PCAOB may not have entirely realized its mission of investor protection. Our analysis is enabled by the transcripts of the 2019 criminal trial U.S. vs. Middendorf and Wada (i.e., PCAOB-KPMG “steal the inspection data” scandal), which for the first time exposed the inner workings of the PCAOB. Our analysis of the transcripts is augmented by other publicly available documents. Our primary conclusion is that the functioning of the PCAOB has been significantly hampered by misalignment of its tasks (in particular in relation to the SEC), sub-optimally designed performance measurement and employee compensation, and weaknesses in the PCAOB’s organizational culture. These misalignments created an environment susceptible to PCAOB employee criminal misconduct which enabled the PCAOB-KPMG “steal the inspection data” scandal and other Board governance and leadership challenges.
dc.identifier.uri https://hdl.handle.net/10125/104059
dc.subject Auditing Regulation
dc.subject PCAOB
dc.subject Organizational Structure
dc.title Deconstructing the PCAOB: Using organizational economics to assess the state of a regulator
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