PCAOB Chairman Logothetis Delivers Remarks at USC SEC Financial Reporting Conference

Remarks as prepared for delivery

Thank you Andy [Call] for the introduction and the invitation to join you today. I also want to thank Tony [Aaron] for his partnership and the USC Leventhal School of Accounting and FEI for convening this important conversation.

This conference is now in its 44^th year. The Leventhal School is celebrating its 47^th anniversary. The fact that this conference began just three short years after the school itself was founded says something profound about its purpose, and its longevity reflects something rare: a community that believes deeply in the integrity of the capital markets and the responsibility we all share to uphold it.

It is my privilege to be here today and be a part of that tradition.

Before I proceed, please know that my remarks reflect my individual views as the PCAOB’s Chairman and do not necessarily reflect the views of the full Board, my fellow Board Members, or the PCAOB’s dedicated staff. 

A Journey That Shapes This Moment

I want to begin by sharing a bit about how I got here because my story is central to how I think about responsibility, trust, and the work before us.  

I grew up in a small village in Greece without electricity or running water, and I attended a one-room schoolhouse until sixth grade. My family relied on assistance from the United States, as did many others in our village. But what we lacked in material wealth, we made up for in values—integrity, hard work, and the understanding that trust, once earned, must never be taken for granted.

Those values carried me from my small Greek village to the United States as a young boy with limited resources but strong determination. They carried me through a long career in the audit profession, where I saw firsthand how much our capital markets depend on trust in financial reporting, trust in auditors themselves, and trust in the institutions that oversee it all.

After retiring, I did not expect to return to a full-time career. But when the opportunity to serve as the PCAOB’s Chairman came up, I was reminded of my responsibility to give back to the country that gave so much to me and to the profession that shaped my life.

Reclaiming the Voice of the Profession

I am proud to serve as the first permanent Chairman of the PCAOB who has public company audit experience, and I place a great deal of importance in the CPA designation. In fact, two-thirds of the professional staff in my office are CPAs.

Under this Board, the PCAOB will value and consider the experience of the professionals who intimately understand this work and the responsibility because they have lived it.

I spent more than four decades in the audit profession. I dedicated my entire career to it. So, I understand the pressures, the judgment calls, the complexity, and the stakes. The work of leading the PCAOB requires someone who can challenge the status quo while also respecting those in the profession who appropriately view their role as aligned with our own—protecting investors.

I bring that balance to this role, and that is why I believe the PCAOB is ready for its next chapter.

Restoring Trust: The PCAOB’s Origins and Purpose

But before we can begin a new chapter, I think it is important to understand how we got here.

The PCAOB was created in the aftermath of the financial devastation created by Enron, WorldCom, and the profound loss of trust in the audit profession.

So, Congress responded with the Sarbanes-Oxley Act or SOX and created the PCAOB—including by mandating that two and only two CPAs sit on our board—to ensure that investor trust is never again taken for granted.

While that mandate remains unchanged, the credibility of the PCAOB is not automatic. With every inspection, with every standard, with every enforcement action, and with all engagement with stakeholders, our credibility must be earned and earned again.  

So, we must ask ourselves: Is the PCAOB fit for purpose for the next 25 years? And what can we do to ensure this?

If the PCAOB is to grow into the innovative and robust oversight body it should and can be, then we must be willing to take the steps necessary to modernize it and begin that process by listening to those who rely on us and take their feedback seriously.

Charting the Path Forward

That is why my first major initiative as Chairman was to ask our stakeholders—audit committee members, investors, auditors, academics—many of you in this room—what the PCAOB’s strategic priorities should be. For the first time in history, we opened a public comment period before even drafting a strategic plan.

The response was extraordinary: nearly 70 comment letters—more than twice as many as the number of comments previous Boards received the last two times that the PCAOB sought comments on their draft strategic plans—and more than 50 letters came from those who had never submitted a comment letter in the Board’s strategic planning process before.

Clear themes have already emerged. Stakeholders want more consistency and transparency in how we evaluate and communicate inspection findings. They want clearer, more scalable standards that keep pace with emerging risks. They want to understand how the PCAOB and auditors are using technology and AI responsibly. And they want an ongoing dialogue—early, often, and with a transparent feedback loop that shows how their input shapes our decisions. 

We take this feedback seriously, and it is now informing the next phase of our strategic planning, including the release of our strategic goals and priorities for public comment later this summer, along with the first ever public comment on our standard-setting agenda.

I encourage you to stay engaged and be candid with us. The challenges we face require action, and if the PCAOB is going to meet the moment for the next 25 years, we must evolve.

As we take this feedback and look ahead, we are grounding our work in the A-C-T framework laid out by the U.S. Securities and Exchange Commission (SEC) Chairman Paul Atkins, which stands for Advance, Clarify, and Transform.

We must Advance the PCAOB’s mission to protect investors by promoting audit quality by sharpening our focus on the oversight activities that most meaningfully affect the reliability of audited financial reporting. That means modernized standards, an inspections program more acutely focused on audit firms’ systems of quality control, and enforcement actions targeted on conduct that poses real risk to investors.

We must emphasize regulatory Clarity. Effective regulation depends on clear rules and predictable processes. Clear standards and transparent oversight are essential to credibility. We will be more explicit about the principles that guide our standard setting, inspections, and enforcement by promoting more consistent implementation, and by increasing transparency wherever possible within statutory and confidentiality limits.

And we must Transform where necessary. Incremental change will not close the gap between how audits are performed and how they are overseen. Transformation requires us to rethink long-standing approaches, invest in the latest technologies, and ensure our staff are trained to use them responsibly.

We must be able to design oversight for the world we live in today and the world that we know is coming.

The scale of our markets has grown rapidly, and the pace of that growth continues to accelerate.

In today’s dollars, the U.S. stock market was worth roughly $1.7 trillion around the 1929 crash leading to the federal securities law frameworks established in 1933 and 1934, which, among other things, required audited financial statements. The stock market was worth about $29 trillion around the early-2000s market peak before the Enron and WorldCom scandals. And today, the market is worth roughly $75 trillion.

As a share of the economy, that represents roughly 80% of GDP in 1929, about 140% of GDP in 2000, and more than 200% of GDP today.

Those numbers reflect extraordinary growth, but they also reflect the strength of the guardrails that have helped sustain confidence in our markets. The Securities Act, the Securities and Exchange Act, the Sarbanes-Oxley Act, and the Dodd-Frank Act, created a durable, future-ready framework for reliable financial reporting and independent auditor oversight.

Our task now is to evolve how we carry out our statutory mandate for effective auditor oversight in a market that is larger, faster, and more complex than ever.

The PCAOB is a steward of a system that underpins trillions of dollars of capital formation. Fulfilling that responsibility requires discipline, sound judgment, and a willingness to keep improving how we oversee auditors, so the system remains effective for the future.

Inspections Modernization: No Time To Waste

One area where I believe improvement is essential is our inspection program. There is no question that the PCAOB’s inspection program has been an important part of our mission since the organization’s founding and has contributed meaningfully to enhancing audit quality over time.

We should be exceptionally proud of everything it has accomplished so far. However, the inspection program also hasn’t changed much since the PCAOB was created.

At the same time, the world around us has changed exponentially. Technology has completely transformed how companies operate, how auditors work, and what investors expect.

Audit firms’ systems of quality control have also evolved, with other auditing standard setters moving several years ago toward more modern, proactive, risk-based quality management standards. The PCAOB has now taken that step through QC 1000.

In short, I believe it is time—past time—that we modernize our inspection program by moving to a more QC-focused inspection approach.

The PCAOB’s inspection program is grounded in the law. Congress charged us with a clear mission: to protect investors and the public interest by overseeing the audits of public companies—and to do that through a continuing program of inspections that assesses whether firms are complying with the law, our standards, and the rules of the SEC, along with the other programs we have.

In other words, this was never meant to be a program that simply reviews a handful of audits in isolation. It was meant to be a program that provides meaningful oversight of the system that produces audit opinions in our capital markets.

And candidly, the feedback we have received suggests that today’s model does not fully achieve that.

Today, we select a non-statistical sample of audits. We review those engagements, and from that limited set, we infer conclusions about a firm’s broader system of quality control with relatively limited direct testing of the system itself.

That approach has limitations. It does not provide a complete view of how a firm’s system actually operates, and it is not the most effective way to deliver on our core objective—protecting investors at scale.

So, we need to evolve.

Our direction is to move toward a model where the primary focus of inspections is the firm’s system of quality control and where engagement-level work serves to corroborate how that system operates in practice.

This reflects a simple reality: audit quality is produced by systems, not by isolated engagements.

Now, let me be clear—this is not a move away from file reviews. We will continue to review individual audit files. But the number of files, how we select them, and what we focus on will evolve.

We will continue to have a baseline of traditional file reviews. But we will increasingly use our understanding of a firm’s quality control system to guide us. That introduces both targeting and unpredictability. And in some cases, it may mean we actually touch more files—but in different, more risk-informed ways.

Because the only way to truly evaluate a system is to assess how it is designed and then see how it operates in the field.

At the same time, as we move in this direction, our intent is not to make our reporting less transparent. We are not looking to move findings into less visible parts of inspection reports or require investors to decode technical audit language.

A quality control–focused model should do the opposite—it should allow us to communicate individual engagement findings more clearly and more meaningfully.

We only need to look at the history of the profession to see why this matters.

The Arthur Anderson/Enron case is instructive. As was widely reported, responsibility at Andersen had become too spread out. Contemporaneous and post-mortem reporting highlighted that as partners had stronger financial incentives of their own and local offices operated more independently, it became harder for the firm to enforce standards consistently and harder for central leadership to stay in control.

The critique that emerged was that in the years before the firm collapsed, its weakened structure and diffuse responsibility created real governance problems. Even when people knew the right accounting answer, the firm’s system—as many concluded—did not reliably make sure that answer carried the day.

It’s also worth revisiting the Adelphia case from the early 2000s since the parallels between it and the Anderson situation are notable. News coverage from the time made the comparison clear based upon allegations in SEC and the U.S. Department of Justice (DOJ) charging documents.

As alleged in the Adelphia case, the audit firm’s system did identify risk, appropriately flagging the engagement for heightened scrutiny and involving a Special Review Partner. Where it fell short, as commentators have said based upon the SEC’s order, was how that oversight function operated in practice. As alleged, the Special Review Partner’s role, once triggered, did not translate identified risk into an effective control over the final audit outcome.

These were not just isolated audit failures. As others have said, they were failures in how the system was designed.

And we see the same pattern in more recent cases.

The Marcum SPAC matter provides a clear example. In this case, the SEC and the PCAOB alleged systemic quality control deficiencies across the firm—driven in part by rapid growth that outpaced the firm’s capacity.

Those system failures, outlined in government charging papers, showed up as engagement level breakdowns in supervision, documentation, risk assessment, and engagement quality review.

That highlights an important point for us.

It is possible to communicate meaningful insights about audit quality through what we disclose publicly—without revealing restricted information on quality control deficiencies. But doing so requires us to rethink how we present inspection findings.

Audit failures are rarely isolated events. They are almost always symptoms of how a firm’s system is designed and how it operates.

So, if we want to protect investors effectively, our inspection model needs to focus on those systems.

That means an approach that evaluates systems directly, uses targeted engagement work to corroborate what we see in combination with traditional engagement level reviews, brings a level of unpredictability—meaning firms should not be able to anticipate where we focus our efforts—and ultimately, produces reporting that is clearer and more decision-useful.

Delivering that model will require investment—in our people, in technology, and in how we structure our work. But it will also require discipline to reduce unnecessary complexity, eliminate duplication, and ensure that we are focused on what matters most: protecting investors while being good stewards of the resources provided to us.

Ultimately, our responsibility is not just to oversee today’s audits. It is to build an inspection program that is effective, efficient, and worthy of the resources entrusted to us, so that investors can have confidence in the system that produces audit opinions for decades to come.

The PCAOB has no time to lose. The longer we wait, the wider the gap grows between how audits are performed and how they are overseen. That gap threatens our credibility and closing it begins with modernizing our inspections program.

That is one reason why we recently announced the formation of the Inspections Modernization Council—a task force charged with helping us redesign the program for the future.

The council will bring together external experts to help the PCAOB build a modern inspection program that is forward-looking, risk-based, and anchored in the systems that drive audit quality.

If you or anyone you know are interested in applying, we would love to hear from you, the application period closes on June 15^th.

The Next Chapter for Quality Control

Modernizing inspections is essential, but it cannot happen in a vacuum. It must be built on a strong foundation—one that evaluates not just what went wrong in a particular audit, but whether the firm’s system is designed to prevent those issues in the first place.

That foundation is QC 1000.

Since the Board issued a concept release in 2020, one goal of this project was to establish a robust standard that requires firms to design quality management systems tailored to the specific risks of their practices.

The final standard was informed by the International Standard on Quality Management, or ISQM1. The Board considered carefully where to align while also being intentional in including incremental provisions that it believed may better serve investor protection and the public interest.

Some stakeholders have observed and articulated in comment letters throughout the standard-setting process and since adoption that certain requirements included in QC 1000 have proven to be costlier than expected and may not contribute to audit quality as intended.

Investor protection and audit quality will forever remain the PCAOB’s North Star and getting a standard right doesn't end when the Board votes to adopt it.

Traditionally, regulators would let a standard take effect, observe its impact over several years, and then conduct a post-implementation review to decide what, if anything, should change. That approach has merits, but it also has costs: firms may invest in requirements that are later revised, investors wait longer for stronger protections, and the regulator remains reactive rather than responsive.

We are taking a different approach, in this unique case, due to the foundational nature of the standard. Instead of waiting for a post-implementation review, we are acting now, before the effective date, to address issues identified during implementation.

That is why next week on Tuesday, June 9^th, the Board will consider whether narrow revisions to the standard and related amendments are warranted to ensure that implementation is both effective and practicable.  

We will also seek public comments to ensure we hear your views on what changes may be necessary, so please be prepared to provide us with your feedback and any ideas you may have. 

The Opportunity Before Us

Let me close with this: Today marks one month until America’s official 250^th anniversary. As I think about this momentous occasion, I keep coming back to the Ralph Waldo Emerson quote: “America is another name for opportunity.”

It’s a new day at the PCAOB, but it’s not a new mission.

The opportunity before us now is to strengthen our credibility and demonstrate our value to the capital markets with clarity and conviction.

I look forward to working alongside all of you to accomplish just that.

Thank you.