Remarks at the 2026 Chicago Forum on Auditing in the Small Business Environment and on Auditing Broker-Dealers

Remarks as prepared for delivery 

Good morning and welcome. It’s a pleasure to be with you today at the PCAOB Forum for Auditors of Small Businesses and Auditors of Broker-Dealers.

Before I begin, while I am here today in my official capacity as a Board Member of the PCAOB, the views I express today are my own and do not necessarily reflect the views of the PCAOB, other PCAOB Board Members, or PCAOB staff. I also want to thank the PCAOB staff for their hard work organizing and participating at today’s event. We have staff represented here from all our major programs including inspections, enforcement, and standard-setting.

As I am still relatively new to the Board, I thought I’d introduce myself as well, or at least my approach to conducting the Board’s work.

First and foremost, I strongly believe that the Board should conduct itself in a principled and consistent manner. Our actions should be so predictable to be almost boring.

Of course, to act principled, you must have principles to begin with. 

My foremost guiding principle is humility. The Board exercises supervisory powers delegated to it from Congress. We possess the ability to bar individuals and firms from the audit industry. We should use those powers when warranted, but we should always approach the exercise of those authorities with caution and humility.

We must also be humble in terms of our knowledge and understanding. There is certainly a lot I don’t know, and even a few things I think I know, that are probably wrong. We should endeavor, as an organization, to constantly seek input from external stakeholders. I want to encourage all interested parties to engage with me and other members of the Board. We should also regularly subject our own views to scrutiny. 

One thing, I am certain of, however, is that our authorities come to us from Congress.  Regardless of whatever my personal policy preferences may be, I will be guided, first and foremost, by the authorities and directives placed upon us by Congress. Quite simply, what does the plain language of the statute say? That’s my compass.

I bring the lens of an economist to the Board. I look forward to my continuous education in auditing issues, but I hope to regularly remind the Board that our decisions have broad economic implications. Of course, being trained as an economist, I will regularly observe that all our policy choices will have both benefits and costs. 

Those guiding principles will be crucial to my engagement in the important work of the PCAOB. I believe the PCAOB and auditors play critical roles in the financial ecosystem. I also agree with our new Chair Jim Logothetis that the PCAOB must get back to the basics – back to the fundamentals of audit quality, investor protection, and disciplined, responsible oversight.¹

Today, I’m here in Chicago, to announce that one of the Board’s near-term projects is to make the PCAOB’s broker-dealer audit inspection program permanent. I’m especially looking forward to today, because I hope this will be the start of an open dialogue about the future of broker-dealer audit oversight.

Context Matters

In 2010, Congress expanded the PCAOB’s authority to include audits of broker-dealers. The Dodd-Frank Act² amended Sarbanes-Oxley³ to give the PCAOB the authority to establish a program of registration and inspection for auditors of broker-dealers. Under this authority, the PCAOB oversees the audits of broker-dealers, not broker-dealers themselves.

In 2011, in response to Dodd-Frank, the PCAOB adopted an interim broker-dealer audit inspection program under Rule 4020T.

Two years later, in 2013 the SEC adopted amendments to Rule 17a-5 under the Securities Exchange Act of 1934 to strengthen and clarify broker-dealer annual financial reporting requirements and also to facilitate the ability of the PCAOB to implement the oversight of auditors of broker-dealers.⁴

In response, the PCAOB adopted two attestation standards—AT 1 and AT 2—governing attestation engagements related to broker-dealer compliance and exemption reports required by the SEC.

For broker-dealers who are required to file compliance reports pursuant to SEC Rule 17a-5, auditors perform examinations.⁵ In performing those examinations, the PCAOB’s attestation standard AT 1 requires auditors to obtain reasonable assurance about whether the statements made by a broker-dealer in its compliance report are fairly stated, in all material respects.

For broker-dealers who are required to file exemption reports pursuant to SEC Rule 17a-5, auditors perform reviews.⁶ Unlike an examination engagement, a review does not result in an opinion being formed as a review is substantially less in scope than an examination.⁷

We’ve been operating under the interim broker-dealer audit inspection program for over a decade. And while I believe that the interim program served an important purpose—it gave us insight and it gave us perspective from auditors, from firms, from regulators like the SEC and FINRA, and from the markets themselves.

Now, after 15 years, it is time to move forward.

It is time to take what we learned and thoughtfully build a permanent, fit-for-purpose broker-dealer audit inspection program – one that is firmly grounded in our mission: protecting investors.

Investor Risk Matters

Broker-dealers play a vital role in our financial system. They are essential to market functioning and capital formation. When it comes to investor assets—when broker-dealer firms are holding investor cash and securities—the stakes for investors are high. Audit failures in that space are not just technical issues; they can have costly consequences for retail investors.

And Congress made our mandate clear: to protect investors and the public interest by improving audit quality.

Given that mandate, I find myself asking, “What types of broker-dealers pose the biggest risk to investor assets?”

And, “Where should we, the Board, focus our oversight of auditors to better protect customers of broker-dealers?”

Design Matters

Both the SEC and FINRA play crucial roles in the landscape of regulation in which broker-dealers and their auditors operate. Their regulatory and inspection efforts directly over broker-dealers play a critical role in protecting broker-dealer customers against the breadth of threats, from frauds to churning. We have to acknowledge their presence in this space.

If we think of a “swiss cheese” model of risk, where do we, the PCAOB, need to concentrate our efforts to make sure that the “holes” do not align? We need to evaluate which risks Congress intended for us to focus on in order to clarify the PCAOB’s role within the broader regulatory landscape.

I believe the role of auditors is important. Auditors perform audit and examination engagements to provide reasonable assurance related to broker-dealers’ financial statements and, if applicable, compliance reports.

Auditors also perform review engagements to provide limited assurance, when applicable, related to broker-dealers’ exemption reports.

Then in turn, we at the PCAOB endeavor to do our job to make sure that the auditors under our purview are following our standards as they execute audit, examination, and review engagements. 

This differing level of assurance raises questions in my mind, should the PCAOB’s oversight in the broker-dealer space be the same for brokers-dealers who file compliance reports as those that file exemption reports?

In the broker-dealer space, the question is not whether oversight is important—it surely is. Rather, my questions are: How does the PCAOB balance addressing investor risk against our fundamental goal to achieve an inspection program that is cost-effective in practice? How do we protect investors without unnecessarily burdening the smaller audit and broker-dealer firms? Are there categories of broker-dealers, where the current level of oversight may not be necessary?

One area where this balance is especially important is when thinking about custody.

Customer-asset risk is highly concentrated among a relatively small subset of broker-dealers. Those firms are comparatively few in number, but they account for the vast majority of required net capital and a very large share of total assets.⁸

Thus, is there a meaningful risk difference between broker-dealers that hold or handle customer assets and those that do not? That question should be thoughtfully considered.

As we move forward, I believe we should carefully evaluate whether PCAOB registration and inspection efforts are appropriately focused on auditors of broker-dealers that provide custody of customer assets, where the risk to investors is most direct and significant.

At the same time, we should thoughtfully consider whether a different approach for inspections may be appropriate for broker-dealers that do not receive, handle, or hold customer funds or securities.

Congress anticipated exactly this kind of tailoring. 

Through the Dodd-Frank amendments, the PCAOB was given the authority to differentiate among broker-dealer business models, when designing its oversight program.⁹ The law even contemplates potentially differing treatment for firms auditing broker-dealers that do not handle, or hold customer securities or cash or are not members of the SIPC.¹⁰

As we work toward making our broker-dealer audit inspection program permanent, I am looking forward to further discussions on the best ways for the PCAOB to use that flexibility wisely. Because that flexibility is not a loophole—it’s a tool. And we should use it wisely.

Reporting Matters

As you know, under our current rules we issue one report annually that summarizes our broker-dealer audit inspection results.

The Board is focused on transparency. As a Board, we are focused on how we can generate more meaningful information for our stakeholders that read our inspection reports.

As the Board thinks through how to best make the PCAOB’s broker-dealer audit inspection program permanent, one of my areas of interest is whether our current reporting on the broker-dealer audit inspection results remains fit-for-purpose or if there are improvements to be made. I am interested in how consumers of our reports use them and what information is needed and useful.

Stewardship Matters

As an economist, I know there are no free lunches. Congress gave the PCAOB authority to inspect, investigate, and set standards for the auditors of SEC-registered brokers-dealers.

Since that authority was granted, the PCAOB has executed on that mandate. But it comes at a cost—for example, the broker-dealers’ share of the PCAOB’s Accounting Support Fee in 2025 was $29 million. That Accounting Support Fee share is paid by broker-dealers, which may then be passed on to their customers in whole or in part.

We have a responsibility to steward those monies carefully and “invest” them to where they bear the most bang for the buck. I am interested in understanding further how the PCAOB evaluates whether those efforts are worth the cost.

Said another way, does the potential investor protection afforded by our efforts outweigh the costs?

Conclusion

I believe the PCAOB is at an important moment. A moment to step back, to listen, and to design a program that reflects both what we learned and where the risks truly lie.

Over the coming year, I expect the Board may consider a proposing release, including a request for comment related to a permanent broker-dealer audit inspection program. I can commit to you that I will continue listening—engaging with auditors, broker-dealers, investors, and other stakeholders—to ensure that what we build is not only effective in theory, but workable in practice.

To get where we need to go, I, and the Board, need your help with two things and maybe more.

First, continue to be patient with us as we work through our process. And second, stay motivated and be engaged with us.

We need your input to get this right.

And if we get this right, we can achieve two goals:

• Stronger protection for investors, and
• A regulatory framework that is appropriately tailored and sustainable for the industry.

Request for Public Comment on Strategic Priorities

Finally, before I take questions, the PCAOB has issued a request for comment on our strategic priorities.

I look forward to hearing from you as we develop the PCAOB’s 2026-2030 strategic plan and guide the PCAOB’s focus for future standard-setting activities.¹¹

Send an email about our strategic priorities.¹²

You can also share your ideas on our efforts to make the broker-dealer audit inspection program permanent.

All input can be sent to [email protected].

Your engagement will help the Board understand potential tradeoffs and to make sound decisions as we continue to work to improve the PCAOB.