The players are in place. Now, what's topping the agenda?

In this column last April, I pondered on what I called the "revolving door" of leadership at key Washington agencies, specifically the U.S. Securities and Exchange Commission (SEC) and the Public Company Accounting Oversight Board (PCAOB). At that time, the question on many people's minds was whom SEC Chairman Christopher Cox would select as the next PCAOB chairman and SEC chief accountant.

Well, the results are in: Mark Olson was named PCAOB chairman in June and Conrad Hewitt was named SEC chief accountant in July. While these appointments, as well as several others in recent months, have answered the question of "who," we're now waiting to see how the actions of these individuals will impact the finance community.

Recent Appointments

In the past six months, it would appear that much of Chairman Cox's time has been dedicated to personnel issues. Olson, a former Federal Reserve Board governor, has a varied work history: with the Fed since 2001; a former staff director of the Securities Subcommittee of the Senate Banking, Housing, and Urban Affairs Committee; a partner with Ernst & Young LLP, and President and CEO of Security State Bank in Minnesota.

Upon Olson's appointment, Acting PCAOB Chairman Bill Gradison stepped back to his position as board member. On the same day, Kayla Gillan was reappointed to a second term with PCAOB. It already appears that, similar to the legacy left by former PCAOB Chairman William McDonough, much of Olson's focus will be on Section 404 of the Sarbanes-Oxley Act dealing with internal control reporting--specifically, PCAOB's efforts in amending Auditing Standard No. 2 (AS2) on Audits of Internal Controls.

At the SEC, Kathleen Casey was sworn in as the 88th commissioner in July, replacing outgoing Commissioner Cynthia Glassman, who had served since 2002. Casey's background includes 13 years on Capitol Hill, most recently as staff director and counsel for the Senate Banking Committee.

Hewitt, the new SEC chief accountant, is a former California Superintendent of Banking, Commissioner of the California Department of Financial Institutions and partner with Ernst & Young. He started working for the commission on August 18. Deputy Chief Accountant Scott Taub had been Acting Chief Accountant since the departure of former Chief Accountant Donald Nicolaisen in October 2005.

There was much speculation about whether the next chief accountant would be someone with public accounting experience or an individual from the preparer community. With the naming of Hewitt, focus now has been shifted towards waiting and watching to learn more about what kind of chief accountant Hewitt will be, as the leadership styles and practices of the past several people in the post--Nicolaisen, Bob Herdman and Lynn Turner--have been varied.

Also, in August, the SEC named Zoe-Vonna Palmrose as Deputy Chief Accountant for Professional Practice. Palmrose was most recently a professor of auditing at the University of Southern California's Leventhal School of Accounting and Marshall School of Business. She replaces Andrew Bailey, who retired in December 2005. Palmrose will be tasked with the daunting undertaking of achieving balance in Section 404 implementation as the SEC prepares management guidance for internal control reporting and works with the PCAOB as it amends AS2.

In addition to the significant personnel changes at the agencies, the Financial Accounting Standards Board (FASB) saw the departure of Board Member Katherine Schipper on July 1. She was succeeded by Thomas Linsmeier, an award-winning professor and researcher at Michigan State University. And, in late August, Board Member Edward Trott announced that he would be prematurely ending his second term next June 30, not in 2009.

What's Next

With all this, it appears that Cox has now completed his flurry of appointments and can focus his attention, as well as that of the top managers he has surrounded himself with, on the issues of the day. There is no doubt that those who have joined the SEC and PCAOB (and the FASB) in this past year, and most certainly the past few months, have a strong breadth of experience and knowledge, and will each play a critical role in the future of financial reporting, accounting and auditing.

Just a few short months into his tenure, beginning in August 2005, Cox waged an "all-out war on complexity." This will be one of the most critical undertakings the agency faces, and I hope that with the assistance of his new staff, as well as the leadership of the PCAOB and the FASB, we will begin to see some measurable progress towards reducing the complexity in financial accounting and reporting and improving transparency for all companies.

Christine DiFabio ([e-mail]) is FEI Director of Technical Activities and liaison to the Committee on Corporate Reporting (CCR).

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