William J. McDonough, the chief regulator of the accounting industry, said yesterday that he will leave that job by Nov. 30 to explore opportunities in corporate governance, finance and international affairs.
McDonough, 71, joined the Public Company Accounting Oversight Board as chairman in 2003 after a series of auditing scandals shook investor confidence and tarnished the reputation of accountants.
The former Federal Reserve Bank of New York president stepped into the breach at a time when the effectiveness of the board was an open question. The panel's first chairman, former FBI director William H. Webster, resigned after concerns were raised about his service as a director at U.S. Technologies Inc., a District-based company beset by fraud.
Under McDonough's guidance, the oversight board performed the first independent inspections of the nation's biggest audit firms, ending more than three decades of self-regulation. The panel also approved several new standards designed to curb conflicts of interest by auditors. The board's staff grew from 40 to nearly 400 employees during his chairmanship.
In an interview, McDonough said the board's greatest achievement was "to bring about a turnabout in the attitude of the accounting profession" after scandals at Enron Corp. and WorldCom Inc.
McDonough said he eventually expects to put together a portfolio of a few projects when he steps aside. But to avoid conflicts and ethics issues, he has not yet discussed other jobs. McDonough, who has long played on an international scale, has kept a hand in outside endeavors. He leads the investment committee of the United Nations Joint Staff Pension Fund and a group affiliated with the International Monetary Fund.
"I enjoy perfect health and have not the slightest interest in retiring, now or ever," he said in a prepared statement.
McDonough's departure presents new Securities and Exchange Commission Chairman Christopher Cox with another major personnel decision. The SEC's chief accountant, Donald T. Nicolaisen, will leave next month, and Cox has not yet named a replacement.
Cox also must decide whether to renominate accounting board member and former California pension fund lawyer Kayla J. Gillan, whose term ends in late October. Gillan would be able to remain in her current job for some time if the SEC does not act by next month.
Veteran securities lawyers said the open slots could give Cox the chance to reconsider the agency's approach to accounting matters. In a prepared statement yesterday, Cox praised McDonough's "superb leadership at a critical time."
"This could mean some major changes in how auditing standards are developed and applied over the next several years and gives the new commission majority an unexpected opportunity to take a fresh look at these issues," said John F. Olson, a partner at Gibson, Dunn & Crutcher LLP.
"Against a background of a pretty positive two weeks for Cox, this is going to be a major test," said Damon A. Silvers, associate general counsel at the AFL-CIO.
Lynn E. Turner, a former SEC official who advises the accounting board, said, "It is critical to investors that [McDonough's] successor continues that effort if the reforms adopted as a result of corporate scandals are to be effective."