Accounting Regulator Had Climate of Fear and Distrust, Report Says

A botched overhaul at the government’s auditing regulator heightened an “environment of fear and distrust” among the staff that led to whistleblower allegations and the ouster of the board’s chairman, according to an official report that the Securities and Exchange Commission commissioned but then kept secret.

The January report by former SEC Chairman Harvey Pitt lays bare deep divisions within the Public Company Accounting Oversight Board, which oversees the audits of companies valued in total at trillions of dollars.

It also alleges organizational dysfunction. There were no records documenting the rationale for several staff firings, and confusion about the roles of the PCAOB’s board members has “created some dysfunctional behavior” by them, the report found.

New SEC Chair Gary Gensler this month ousted William Duhnke as PCAOB chairman, and is in the process of replacing the rest of the five-member board.

A PCAOB spokeswoman didn’t immediately return a request for comment. An SEC spokesman declined to comment. Mr. Duhnke said he hasn’t seen the report and therefore cannot comment on it.