Deconstructing the PCAOB: Using organizational economics to assess the state of a regulator

Using the principles of organizational economics in this study we assess the quality of the organizational architecture of the Public Companies Accounting Oversight Board (PCAOB). In particular, we use the Four Pillar Framework developed in Brickley et al. (2000) to understand why—according to the SEC’s Chairman Gensler and other stakeholders—the PCAOB may not have entirely realized its mission of investor protection. Our analysis is enabled by the transcripts of the 2019 criminal trial U.S. vs. Middendorf and Wada (i.e., PCAOB-KPMG “steal the inspection data” scandal), which for the first time exposed the inner workings of the PCAOB. Our analysis of the transcripts is augmented by other publicly available documents. Our primary conclusion is that the functioning of the PCAOB has been significantly hampered by misalignment of its tasks (in particular in relation to the SEC), sub-optimally designed performance measurement and employee compensation, and weaknesses in the PCAOB’s organizational culture. These misalignments created an environment susceptible to PCAOB employee criminal misconduct which enabled the PCAOB-KPMG “steal the inspection data” scandal and other Board governance and leadership challenges

Genome-wide identification and phenotypic characterization of seizure-associated copy number variations in 741,075 individuals

Copy number variants (CNV) are established risk factors for neurodevelopmental disorders with seizures or epilepsy. With the hypothesis that seizure disorders share genetic risk factors, we pooled CNV data from 10,590 individuals with seizure disorders, 16,109 individuals with clinically validated epilepsy, and 492,324 population controls and identified 25 genome-wide significant loci, 22 of which are novel for seizure disorders, such as deletions at 1p36.33, 1q44, 2p21-p16.3, 3q29, 8p23.3-p23.2, 9p24.3, 10q26.3, 15q11.2, 15q12-q13.1, 16p12.2, 17q21.31, duplications at 2q13, 9q34.3, 16p13.3, 17q12, 19p13.3, 20q13.33, and reciprocal CNVs at 16p11.2, and 22q11.21. Using genetic data from additional 248,751 individuals with 23 neuropsychiatric phenotypes, we explored the pleiotropy of these 25 loci. Finally, in a subset of individuals with epilepsy and detailed clinical data available, we performed phenome-wide association analyses between individual CNVs and clinical annotations categorized through the Human Phenotype Ontology (HPO). For six CNVs, we identified 19 significant associations with specific HPO terms and generated, for all CNVs, phenotype signatures across 17 clinical categories relevant for epileptologists. This is the most comprehensive investigation of CNVs in epilepsy and related seizure disorders, with potential implications for clinical practice

Capital markets effects of disclosure and auditing in emerging markets

A panel discussing emerging markets including market disclosure and auditing.Salem Cente

Economic Consequences of Auditor Reputation Loss: Evidence from the Auditor Inspection Scandal

We examine whether the 2017 audit inspection scandal affected KPMG's client relationships and audit quality. Using the trial transcripts, we construct a novel dataset of KPMG clients whose audit engagements were compromised by information leakage from the PCAOB (Transcript Sample). We then examine KPMG's response to this regulatory data theft scandal. Our findings suggest an increased departure rate following the public revelation of the scandal of clients in the Transcript Sample but not in the broad portfolio of KPMG clients. While KPMG's audit fees do not appear to have changed, we find a reduction of KPMG's non-audit fees, which is concentrated in the Transcript Sample clients. Finally, we find that the quality of loan loss provisions of banking clients in the Transcript Sample decreased after the scandal. Overall, our results suggest the audit inspection scandal has imposed costs on both KPMG and its PCAOB-inspected clients whose identities were exposed

Nitrosative stress and corneal transplant endothelial cell death during acute graft rejection.

BACKGROUND: Nitrosative stress takes place in endothelial cells (EC) during corneal acute graft rejection. The purpose of this study was to evaluate the potential role of peroxynitrite on corneal EC death. METHODS: The effect of peroxynitrite was evaluated in vivo. Fifty, 250, and 500 microM in 1.5 microL of the natural or denatured peroxynitrite in 50 microM NaOH, 50 microM NaOH alone, or balanced salt solution were injected into the anterior chamber of rat eyes (n=3/group). Corneal toxic signs after injection were assessed by slit-lamp, in vivo confocal imaging, pachymetry, and EC count. The effect of peroxynitrite was also evaluated on nitrotyrosine and leucocyte elastase inhibitor/LDNase II immunohistochemistry. Human corneas were incubated with peroxynitrite and the effect on EC viability was evaluated. A specific inducible nitric oxide synthase inhibitor (iNOS) was administered systemically in rats undergoing allogeneic corneal graft rejection and the effect on EC was evaluated by EC count. RESULTS: Rat eyes receiving as little as 50 microM peroxynitrite showed a specific dose-dependent toxicity on EC. We observed an intense nitrotyrosine staining of human and rat EC exposed to peroxynitrite associated with leucocyte elastase inhibitor nuclear translocation, a noncaspase dependent apoptosis reaction. Specific inhibition of iNOS generation prevented EC death and enhanced EC survival of the grafted corneas. However, inhibition of iNOS did not have a significant influence on the incidence of graft rejection. CONCLUSION: Nitrosative stress during acute corneal graft rejection in rat eyes induces a noncaspase dependent apoptotic death in EC. Inhibition of nitric oxide production during the corneal graft rejection has protective effects on the corneal EC survival

Distinct evolution and dynamics of epigenetic and genetic heterogeneity in acute myeloid leukemia

Genetic heterogeneity contributes to clinical outcome and progression of most tumors. Yet, little is known regarding allelic diversity for epigenetic compartments and almost no data exists for acute myeloid leukemia (AML). Here we examined epigenetic heterogeneity as assessed by cytosine methylation within defined genomic loci with four CpGs (epigenetic alleles), somatic mutations and transcriptomes of AML patient samples at serial time points. We observe that epigenetic allele burden is linked to inferior outcome and varies considerably during disease progression. Epigenetic and genetic allelic burden and patterning follow different patterns and kinetics during disease progression. We observed a subset of AMLs with high epiallele and low somatic mutation burden at diagnosis, a subset with high somatic mutation and lower epiallele burdens at diagnosis, and a subset with a mixed profile, suggesting distinct modes of tumor heterogeneity. Genes linked to promoter-associated epiallele shifts during tumor progression display increased single-cell transcriptional variance and differential expression, suggesting functional impact on gene regulation. Thus, genetic and epigenetic heterogeneity can occur with distinct kinetics, each likely able to impact biological and clinical features of tumors