Examine the available evidence: Was the Duhnke PCAOB captured?

The Public Company Accounting Oversight Board (PCAOB) was created in 2003 after Congress passed the Sarbanes-Oxley Act of 2002. The mission of the Board is to serve the public interest through regulation of accounting firms who audit public companies. Regulatory agencies are susceptible to regulatory capture whereby the agency serves the interests of the regulated industry rather than the public interest. In 2017, the Securities Exchange Commission appointed five new members, including Chairman Duhnke, to the PCAOB. This paper applies Carpenter’s (2014b) model to evaluate whether the PCAOB was captured during the Duhnke chairmanship. The susceptibility of the PCAOB to regulatory capture is important because the effectiveness of the capital markets depends on trust in financial statement audits. The available evidence is consistent with a “weak” capture conclusion. During the Duhnke Board’s tenure, there was diminished activity in the areas of inspection, standard-setting, and enforcement.