Auditing

Investor Advocate to Leave Audit Oversight Board

Kayla Gillan says audit firms have become increasingly focused on protecting corporate shareholders.
Alan RappeportSeptember 19, 2007

When Kayla Gillan, a founding member of the The Public Company Accounting Oversight Board, leaves the PCAOB by the end of January, it will be with the sense of having crafted a work in progress.

Earlier this week, the PCAOB announced that Gillan would step down after more than five years with the audit overseer. First named to the fledgling board by the Securities and Exchange Commission in October 2002, she began her second term in October 2005. One of the biggest of the jobs of the PCAOB has been to construct an independent way of inspecting audit firms, replacing the previous peer-review system run by the American Institute of Certified Public Accountants. “I’m proud of the inspection program that we built from scratch,” Gillan told CFO.com. “It’s like building an airplane while you’re flying it.”

The ride has had its bumps, she suggested. Gillan, a Democrat, said that the PCAOB will need to continue to improve its working relationship with the SEC, which oversees it. “There will always be some levels of stress,” says Gillan. “How far the SEC can go in directing our policy-making is still something that the board and future boards will have to work through.”

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The job has also had provided considerable satisfactions, the lawyer says. She’s particularly proud of the development on her watch of the controversial Auditing Standard 2, which governed auditor attestations of corporate internal controls under the Sarbanes-Oxley Act, and its successor, Auditing Standard 5, for example.

Much of her work has focused on launching the PCAOB’s small-business auditing program. For instance, she spearheaded the board’s “Forum on Auditing in the Small Business Environment” which has attracted more than 2,000 members of the small-business community since 2004, the PCAOB said. Gillan

In a telephone interview, Gillan said she was pleased with the PCAOB’s investor-focused culture and that audit firms have become increasingly focused on protecting investors. PCAOB chairman Mark Olson said that Gillan has played a large role in stressing that focus. “Kayla has been invaluable in sensitizing the board to investor issues as they relate to our work,” he said.

In the future, the board will have to continue to handle the growing number of international inspections and the wider use of the International Financial Reporting Standards, according to Gillan. “I think that the complexity of the accounting standards and the growing use of fair value raise challenges for the auditing profession,” she says.

While the outgoing board member’s term officially ends on October 23, she will remain in place through the end of the year. The PCAOB has not named Gillan’s replacement.

Before joining the PCAOB, Gillan served in various positions at the California Public Employees’ Retirement System, concluding her tenure at CalPERS as general counsel. A graduate of the California State University at Sacramento and the University of California at Davis law school, Gillan said she hopes to continue working to protect investors.