Statement on Proposed Amendments Related to QC 1000 – Pursuing a More Moderate and Sustainable Course

Remarks as prepared for delivery

Thank you, Mr. Chairman.

Today, we propose to amend QC 1000 by charting a more moderate and sustainable course.   

I am particularly pleased by the proposed elimination of the “design-only” requirements for “inactive” registered firms that do not perform “engagements” (as defined in QC 1000). The proposal corrects the notion in the adopted standard that the Sarbanes-Oxley Act requires firms that do not perform engagements to design a quality control system. 

The proposed rescission of the design-only requirement has the potential to support or increase competition in the public company audit market, which I believe will benefit investors. The proposal’s economic discussion notes that the number of design-only firms has been decreasing, particularly in 2025, driven in part by more firms requesting to withdraw from registration. Because some of these withdrawals can be attributed to QC 1000, the proposed rescission may not only reduce future withdrawals but also encourage some firms to re-apply for registration, thereby increasing the supply of registered firms. This is good policy. If we want to help protect investors in small companies that can only afford and may only be attractive to small auditing firms, we need to create a regulatory environment that increases the supply of responsible registered firms able to compete for business.

I recognize that rescinding the design-only requirement has potential negative impacts in that currently registered inactive firms (including newly registered firms) might be less prepared to undertake PCAOB-regulated engagements when an opportunity arises. Those concerns may be legitimate, but I do not believe we should require inactive firms to design QC 1000-compliant systems by December 15, 2026, when those firms might not seek a PCAOB-regulated engagement for several years. 

The proposal solicits public comment on several alternatives to the rescission of design-only. I am particularly interested in reading comments on the alternative of requiring inactive firms to design a QC 1000-compliant system closer in time to when they engage in PCAOB-related activities, such as pursuing an engagement. This alternative strikes a different balance between the cost of design and the benefit of early preparation for PCAOB-regulated engagements.¹

I also believe the PCAOB may wish to explore non-regulatory approaches that help inexperienced firms, for example, develop stronger quality control systems. In addition to wielding our regulatory power, our “fist” -- we could offer “a helping hand” with a training program that helps inexperienced firms better understand and comply with QC 1000 and other PCAOB standards. Training could be provided by PCAOB inspectors who have previous experience conducting PCAOB-regulated audits and current experience inspecting PCAOB-regulated engagements. In other words, training by inspectors who have seen it from both sides. Such a training program would leverage existing PCAOB resources and require little, if any, additional funding. 

By implementing ideas like this training program, I believe this Board can “Make the PCAOB Helpful.” We are already off to a good start. For example, on May 13, 2026, Chairman Logothetis announced a formal consultation process through which auditors will be able to seek clarification from the PCAOB on complex or emerging issues.² I suspect that the largest, most experienced firms will avail themselves of this formal consultation process.  A PCAOB training program targeted to smaller, less experienced firms would complement the formal consultation process.  Investors would benefit from such a training program, because it could help increase audit quality. Investors could also benefit from the training program if it helps smaller firms realize that they are not yet ready to perform PCAOB-regulated engagements. A PCAOB training/technical assistance program for smaller, less experienced firms is a “heads you win, tails you win” approach for investors.

In conclusion, I support the proposed amendments to QC 1000. I want to thank the PCAOB staff who did the heavy lifting. The PCAOB’s success is tied to you and the work you do. I hope you will take some well-deserved time off during the comment period.

Thank you and back to you, Mr. Chairman.