Statement in Support of Request for Public Comment on PCAOB Strategic Priorities

Remarks as prepared for delivery 

Good morning and thank you, Chairman Logothetis.

I first want to mention what a pleasure it has been getting to know you and Board Member Calabria, and continuing to work with Board Member Laughton in his new capacity. I welcome and look forward to our ongoing engagement and dialogue surrounding the PCAOB’s important audit oversight work to protect the investing public.  

I am extremely pleased that we are here today to hear from our dedicated staff in the Office of the Chief Operating Officer with a goal of seeking public comment to help inform the Board and staff on relevant priorities in advance of developing the PCAOB’s next strategic plan. I applaud you, Mr. Chairman, for initiating this novel approach for the PCAOB; it is one that I welcome. I believe we are a more effective regulator when we actively engage with and seek insights and perspectives from all our stakeholders regularly. This is particularly true as it relates to setting our priorities and key initiatives that will be captured in our next strategic plan.

The PCAOB’s strategic plan serves as an anchoring document that guides the work of the Board and staff; it ensures the PCAOB’s efforts reflect the needs of our stakeholders. It also equally benefits both our external and internal activities by providing transparency and clarity on our priorities, together with the rationale behind them.

Marketplace of Ideas

In prior remarks, I emphasized my view that the PCAOB should serve as a Marketplace of Ideas. Through our oversight functions, the PCAOB enhances transparency and builds trust, which serves the capital markets and ultimately supports the efficient allocation of capital. By encouraging and welcoming diverse views, whether through engagement with members of our Investor Advisory Group and our Standards and Emerging Issues Advisory Group, direct engagement with the participants in the financial reporting ecosystem, or today through the solicitation of comments to inform our priorities, we will have better knowledge and data on which to guide our decisions.

I have been reflecting on the various priorities and initiatives that a new strategic plan might contain. While the staff will be describing a series of broad questions for feedback for the Board’s consideration, I want to echo the Chairman’s call for commenters not to feel limited by those questions, and I would like briefly to note a few specific points that I hope will be addressed by investors, audit committee members, auditors, members of the academic community, and financial statement preparers.

Standard Setting Activities

• Given the expanding use of artificial intelligence (AI) in both the preparation of financial statements and in the performance of the audit, what changes to our audit standards are warranted? How do these advances impact what we have traditionally considered audit evidence?
• Are there existing audit standards that impede or limit an auditor’s ability to use advanced technologies? 
• Should registered accounting firms be required to disclose the nature and extent of the use of AI in an audit, akin to the current reporting requirement of Certain Audit Participants under Form AP?

Inspection Activities

• What do you see as having been the most positively consequential elements of the PCAOB’s inspection program? What do you see as ways the inspection program might be improved?  
• What aspects of our public inspection reports do you find useful? What changes, if any, to our inspection reports would be most useful and why?

Private Equity Investments in Registered Accounting Firms

• How should we evaluate the audit quality and independence implications of outside ownership in registered accounting firms through alternative practice structures (APS)?
• Should a registered accounting firm’s governance structure, such as operating under an APS, be subject to a reporting requirement to the PCAOB and should that reporting be public?

Definition of Audit Quality

• Would a PCAOB definition of audit quality help the participants in the financial reporting ecosystem develop a shared understanding of audit quality? How could this definition provide a basis for evaluating audit performance?
  

Conclusion

In conclusion, the Public Law preamble to the Sarbanes-Oxley Act begins with the words “To protect investors.”¹ I view investor protection as our North Star. Investors are at the heart of all that the PCAOB does. For this reason, I strongly encourage all commenters to address in their comments specifically how their suggestions would further the goal of protecting the interests of investors.

I want to thank all commenters in advance for your attention to this request and sharing your thoughts. Your insights will make us better.

Thank you, Mr. Chairman, for this opportunity to seek public comment on our strategic priorities.