Christina Ho, a member of the Public Company Accounting Oversight Board, complained publicly on LinkedIn that a pair of influential senators are singling her out for audit failures at firms.
In a
In the letter, they pointed to a statement from a
Ho complained that the senators' letter accused her of appearing to be "focused on downplaying and misdirecting attention from these atrocious findings," and of making false statements in her speech. She added, "The letter also contains a thinly veiled threat to me (and others) by noting how Senator Warren had successfully urged the Securities and Exchange Commission (SEC) in 2021 'to remove and replace all members of the PCAOB.'"
"The fact that the Senators decided to single me out is troubling because I believe they are trying to stifle me from expressing views inconsistent with their false narrative," said Ho. "I am writing to: (1) protect investors, by providing context as to why the Senators' alarmism is unwarranted; and (2) defend myself and my views which are based on over 30 years of professional experience."
Ho explained why the 46% deficiency rate should not be as alarming as the senators said.
"To be clear, I am not saying that a 46% deficiency rate or a 5% incorrect audit opinion rate is acceptable, it's not," said Ho. "What I am saying is that when you put the 46% figure cited by PCAOB and the Senators into context, the sky is not falling, and for the Senators to state that investors 'face a coin flip when it comes to whether they should believe and trust the results of public companies' audits,' is unfair and unwarranted. Since my work at the U.S. Department of the Treasury (Treasury) leading the governmentwide implementation of the first federal open data law sponsored by Senator Mark Warner (D-VA), I have dedicated my career to promoting data-driven government and evidence-based policymaking, because that is how we build trust in government. The best way to protect investors is to drive audit quality, especially through innovation. However, regulating through enforcement will not be effective. Fear might extract compliance, but it will not achieve audit quality. There is a significant opportunity to promote audit quality through innovation."
Ho said she had worked with 10 experts in the past two years to develop recommendations to the PCAOB regarding ways to promote audit quality through emerging technologies like artificial intelligence. She took umbrage at the accusations from the senators.
"As an immigrant and a naturalized U.S. citizen, one of my most treasured values of American democracy is freedom of speech," said Ho. "Like many women of color, it has taken me a long time to be able to use my voice to express my views. As a public servant who contributed significantly to the advancement of federal financial transparency and accountability, I have earned the trust of many people in governments, industries, academia, and civil societies. As a PCAOB Board Member, I have applied my expertise in auditing, financial reporting, technology, and public policy to advance the PCAOB's mission of investor protection. That is why the Senators' letter was so stunning to me."
She felt threatened by the senators' letter.
"U.S. Senators have tremendous influence," said Ho. "Senators Warren and Whitehouse made it clear in their letter to the PCAOB that Senator Warren got the former PCAOB Board fired. Is this a threat for simply using my voice to speak the truth in the name of investor protection? If Congress did not want dissenting voices on the PCAOB Board, why did it pass a law that required a five-member board to govern the PCAOB? Yes, those in charge have the power to fire me without cause; the power to put my daughter's healthcare, education, and future in jeopardy as I am a single parent; the power to deprive investors of the whole truth; and the power to sow distrust about the public company auditing profession and with it our capital markets."
Ho pointed to her right to speak out as an American.
"But why?" she wrote. "Is there anything more undemocratic than trying to silence the voice of a fellow American? Is there anything more abusive than U.S. Senators' thinly veiled threat to take away the jobs of public servants just because they have different perspectives? Is there anything more hypocritical than Senators who claim to serve underprivileged and underrepresented populations, but do not think twice about threatening a woman of color for simply doing what she believes is right?"
She pointed out that the PCAOB is not a federal agency even though it is a federal regulator.
"I am not a political person," she added. "I was a career executive at Treasury and served under three Treasury Secretaries during two Administrations. I took an oath to serve the American people and support the Constitution, which I take seriously every day. I agree that the PCAOB should be held accountable. Like all financial regulators, PCAOB has enormous power. However, unlike other financial regulators, we are not a federal agency. In my opinion, all regulators should be subject to congressional oversight because unchecked power is dangerous and harmful to our people and democracy. I welcome any opportunities to be held accountable for doing my job honestly and serving investors as well as the American people at large."
Ho suggested in her IIA speech that financial restatements were a better measure of audit quality than the audit deficiency rate.
"To me, the best and most direct metric that measures reporting, and audit quality is the number of public company financial restatements, and this particular metric suggests a more positive and hopeful reality," she said.
The senators' letter also criticized a statement by PCAOB chair Erica Williams in response to the report: "In a statement upon the release of the report, Chair Williams commented that: 'These inspection results point to some small signs of movement in the right direction.'"
"This is the wrong conclusion to draw from an embarrassing and intolerable set of findings," wrote Sen. Warren and Whitehouse. "Even more troubling is the PCAOB's attribution of these systemically high failure rates — which appears to affect virtually all auditors — to 'more isolated incidents' and outliers."
Williams in turn seemed to counter Ho's claim that restatements are a more accurate reflection of audit quality than deficiencies during a
"These Part I.A deficiencies are relevant when assessing the quality of work done by an audit firm," she said. "But audit quality is complex, and it escapes simplistic proxies or measures. For instance, some have suggested that audit quality can be best measured by the number of issuer restatements. Specifically, some argue that a relatively low number of restatements translates to high audit quality. I believe that view is too simplistic. A properly performed audit should identify errors before the need for restatements. At the same time, a poorly performed audit does not always mean that the financial statements are erroneous."
