Statement on the Adoption of QC 1000 Amendments

Good morning. Today’s vote to adopt amendments to QC 1000 is an important moment for the PCAOB, for audit quality, and for the investors who rely on independent audits to make informed decisions in our capital markets.

This is not just standard setting or rulemaking. This is the PCAOB’s strategic priorities in action.

When we released our draft 2026-2030 Strategic Goals and Objectives earlier this summer, we identified several priorities that must shape the future of audit oversight:

1. Modernizing standard setting and implementation
2. Modernizing inspections through a quality control-focused approach
3. Deepening stakeholder engagement and transparency
4. Transforming how oversight is delivered through better data and information

The amendments before us today advance each of these priorities. They demonstrate that QC 1000 is not an isolated project. Rather, it is part of a broader modernization agenda designed to strengthen audit quality and improve how oversight is delivered for investors and our capital markets.

These amendments also demonstrate this Board’s commitment to evidence-based, stakeholder-informed, transparent policymaking. A supplemental request for comment on QC 1000 was released on June 9, 2026, and the changes reflected in today’s adopting release show that when stakeholders raise thoughtful concerns, we listen, we analyze, and we respond where appropriate.

The Importance of International Alignment

Another important theme in these amendments is international alignment.

The PCAOB is committed to reducing unnecessary differences across regulatory jurisdictions, particularly where greater alignment can enhance audit quality. The amendments allowing firms to select their own evaluation date and the revisions to the evaluation framework move QC 1000 closer to the International Standard on Quality Management 1 (ISQM 1) and other quality management frameworks used around the world.

That alignment matters. It reduces complexity and implementation burdens for global firms operating across multiple jurisdictions. It helps ensure that quality control systems can be designed and operated consistently across borders.

But alignment does not automatically mean uniformity. And it certainly does not mean lowering the bar.

We preserved the rigor we believe is appropriate for U.S. capital markets: structured evaluation conclusions, required consideration of severity and pervasiveness, detailed reporting through Form QC, and requirements tailored to our statutory mandate and regulatory environment.

We should pursue alignment where it enhances audit quality and promotes effective implementation, while maintaining distinct requirements where the needs of investors and the unique characteristics of U.S. capital markets warrant a different approach.

The External Quality Control Function (EQCF)

One of the amendments to QC 1000 being adopted is the rescission of the EQCF requirement. As initially contemplated, the principal benefit of the EQCF requirement is the potential for a fresh external perspective.

Some commenters viewed the EQCF role as an important safeguard against firms' commercial pressures and interests that may adversely affect audit quality. Indeed, the Board previously recognized in the 2024 QC 1000 adopting release that the EQCF could, in some circumstances, reduce negative impacts of commercial considerations. These commenters, however, appear to regard this potential benefit as much more certain than was reflected in the 2024 adopting release.

The question is whether the EQCF, as structured, could reliably provide that benefit in the manner these commenters envision.

The firm would select, engage, compensate, retain, and remove the individual performing that EQCF role. As a private contractor, that individual has his or her own interests to consider and may prioritize preserving the relationship with the firm over challenging the firm's judgments when protecting investor interests would call for such a challenge. Those structural features limit the extent to which the EQCF can serve as the kind of safeguard against commercial pressures and interests that some commenters envision.

If the EQCF, as some commenters suggested, is expected to operate as a safeguard against firms’ commercial pressures and interests, then the extent to which the EQCF could reliably serve that role would depend significantly on the governance arrangements surrounding the position, including who appoints, compensates, evaluates, retains, and removes the individual performing it.

Whoever exercises those governance responsibilities would need to ensure that the EQCF prioritizes investor interests when those interests conflict with the firm’s commercial interests.

However, audit firms are private partnerships. Identifying an external party that could credibly exercise those governance responsibilities raises significant practical and institutional questions. Those questions arise because there is a significant difference between providing a fresh external perspective and reliably serving as a counterweight to firms' commercial interests. The latter requires independence, governance, and public accountability features that private contractors may not possess on their own.

The amendments today do not limit or prevent market participants from seeking the benefit of an additional independent review. For example, investors or audit committees could require it to be considered for potential engagements, and firms could decide whether the potential benefits justify the costs. That is the free market at work.

Additionally, the context in which the EQCF requirement would operate has changed. Since the adoption of QC 1000, the PCAOB has continued developing a QC-informed inspection approach. We are modernizing our inspection program, which will provide better visibility into a firm's quality control system, its evaluation of that system, and its remediation efforts, alongside inspection findings from audit engagements. That information will better position the PCAOB to assess whether a firm's quality control system is operating effectively and to challenge firm conclusions when warranted.

Against that backdrop, the case for retaining the EQCF requirement becomes even less compelling.

The Design-Only Requirement

That brings me to the rescission of the design-only requirement. The objective behind that requirement was understandable: if a firm is registered with the PCAOB, it should be prepared to comply with PCAOB standards before it accepts work.

I agree with that objective. The question, however, is whether the design-only requirement, as adopted, is the best way to accomplish it.

I believe that the underlying goal of firm readiness is both reasonable and important. Investors, audit committees, and the investing public should be able to expect that any firm entering the PCAOB audit market has the governance, methodology, personnel, training, ethics, and independence necessary to support audit quality.

Wanting firms to be prepared before they undertake audits under PCAOB standards is not a controversial proposition. It is consistent with investor protection, sound oversight, and confidence in our capital markets.

At the same time, it is important to evaluate whether particular regulatory requirements are appropriately tailored to the risks they are intended to address. The concern with the design-only requirement is that it would impose quality control system design obligations on registered firms even if they have not performed, and may never perform, an engagement under PCAOB standards. For those firms, the costs associated with designing and maintaining a PCAOB-compliant quality control system in the abstract may outweigh the practical benefits, particularly when no issuer or broker-dealer audit work is being performed.

For that reason, I view the rescission not as a retreat from audit quality, but as a targeted refinement. Supporting readiness and protecting investors does not require us to impose the same obligations on every firm regardless of its circumstances. Regulatory requirements should be scalable, efficient, and connected to actual or reasonably foreseeable work performed under PCAOB standards. As regulators, we have a responsibility to periodically reassess requirements whose benefits are uncertain while their costs are concrete and ongoing.

Importantly, rescinding the design-only requirement does not mean abandoning the readiness objective. In fact, I believe there may be more effective ways to achieve it. The PCAOB can continue to examine whether readiness expectations should be addressed through enhancements to its registration program, strengthened monitoring of registered firms, and targeted readiness expectations before firms undertake engagements under PCAOB standards. I believe these proactive approaches will provide the Board with better information, give firms clearer expectations, and focus regulatory attention where it is most needed.

Let me be clear: rescinding the design-only requirement does not relieve firms of accountability. Once a firm performs or has responsibilities with respect to an engagement conducted under PCAOB standards, the requirements of QC 1000 would apply. Additionally, the PCAOB retains a broad range of oversight tools through registration, inspections, reporting obligations, and enforcement. Firms remain responsible for complying with PCAOB requirements and maintaining the systems necessary to support high quality audits.

In my view, readiness is the right goal. But a design-only obligation for firms that may never perform work under PCAOB standards is not the right tool. We should pursue the same objective through mechanisms that are more targeted to actual risk, more transparent to the Board, and more useful to firms.

The rescission, therefore, reflects a simple principle: strong oversight should be rigorous, but it should also be proportionate. We can expect firms to be ready, protect investors, and promote audit quality while using tools better suited to the firms and risks at issue.

The Hinge Opening the Door to Inspection Modernization

QC 1000 is not an end point. Rather, it is the foundation for the modern oversight model the PCAOB is building.

QC 1000 gives firms a framework. Form QC gives the PCAOB information. And inspection modernization gives the PCAOB the ability to use that information.

Together, they allow us to move from evaluating isolated audit files toward understanding the systems that produce audit quality.

More often than not, engagement-level deficiencies are symptoms of something that happened much earlier – training issues, supervision issues, methodology issues, governance issues, or resource allocation issues.

Again, QC 1000 gives firms a framework to identify and address those problems. Inspection modernization gives the PCAOB a better opportunity to identify whether they have done so.

That combination is how we become a more proactive regulator.

Let me put it another way: If inspection modernization is the door to a more forward-looking oversight model, QC 1000 is the hinge that makes that door work. The hinge carries the weight, guides the movement, and connects the door to the frame. Today’s amendments reinforce the hinge so the door can finally open fully, giving the PCAOB the visibility and insights needed to challenge firm conclusions and strengthen audit quality.

Closing

Today’s amendments improve the operability of QC 1000. They strengthen alignment with our international counterparts where appropriate. They preserve the rigor demanded, rightfully so, by U.S. investors. And most importantly, they position QC 1000 to serve its intended purpose: a framework for firms to design, implement, and operate an effective QC system, which ultimately enables a modern, QC-informed inspection program capable of challenging firm’s conclusions, promoting accountability, and improving audit quality before engagement-level problems occur.

I would like to recognize and thank all the staff from across the PCAOB’s Divisions and Offices who have contributed to today’s adopting release, especially Dominika Taraszkiewicz, Jessica Watts, Karen Wiedemann, Ekaterina Dizna, Linnette Klinedinst, Schuyler Simms, Carla del Monico, and Kevin Lombardi in the Office of the Chief Auditor; Ying Compton, Erik Durbin, Nick Galunic, and Zoey Xie in the Office of Economic and Risk Analysis; and George Kostolampros, Matt Goldin, Drew Dropkin, and Jennifer Gurzenski in the Office of the General Counsel.

I also thank my fellow Board Members for their collaboration; Brent Simer, Anita Doutt, Danette Edwards, and Matt Lloyd from my team; and the staff from the SEC’s Office of the Chief Accountant.