Since our inception, the PCAOB has been careful to assure that its activities are necessary or appropriate to meet its mandates and responsibilities under the Sarbanes Oxley Act, now more fully defined in our Strategic Plan. Our strategic goals and objectives were the starting point for this year’s budget process. Through intense collaboration between the Board and our program leaders, we developed a budget that funds our planned activities for next year with great specificity. In doing so we have been mindful that our mission is supported by public issuers and, in turn, by their shareholders.
Certainly one of our key programs – and the largest part of our budget – is our inspection program. As I mentioned earlier, given the universe of audits of public companies and public accounting firms and the relatively small size of our inspections staff, it is critically important that the PCAOB accurately risk focus its inspections. Our Division of Inspections and our Office of Research and Analysis work very closely to identify high risk audits and risks at audit firms. Their work involves a qualitative and, more recently, an additional quantitative analysis of external public information blended with information we have gleaned through prior inspections and communications with firms. The expertise and analytical tools we are developing are making us better supervisors and are critical to the success of our supervisory program.
In past years, our Inspections Division and our other divisions that seek to hire experienced accountants have fallen short of their hiring goals.
As a result we have had to make do with the resources we have. This often requires that we make trade offs in how we allocate resources and heightens the risk that we cannot fulfill our mandate as we intend. This year, however, our Division of Inspections is very close to meeting its hiring goal for 2007. But we still have some way to go before the Inspections and other divisions, most importantly the Office of the Chief Auditor and Division of Enforcement and Investigations, have adequate staff to meet our annual program needs. Consistent with budgetary limitations, we will carefully add staff until those divisions reach a steady state. Having said that the PCAOB is now in sight of reaching full maturity.
Our Budget Office, ably led by Bill Wiggins, has worked collaboratively and tirelessly to gather and analyze the information necessary to assess the organization’s 2007 progress in meeting our strategic goals and to build a budget that meets the PCAOB’s funding needs for the coming year. But even Bill could not have completed the budget, including assuring compliance with the SEC’s budget rule, without the unflagging support of Yoss Missaghian and Derek Kuiper. Bill and his staff worked closely with SEC staff during the budget process. I also commend our program directors and office heads for their collaboration in the budget process, their strong commitment to the PCAOB’s mission, and their thoughtful stewardship of the organization’s resources.
While this budget takes a very conservative approach to funding, I believe it should be adequate to support our 2008 initiatives. I wish to extend my appreciation to the Board for their active participation and support during this budget process.