Strengthening Oversight Through Clarity, Discipline, and Data

Remarks as prepared for delivery 

Thank you, Mr. Chairman. And thank you to Lorene Rosenberg, Randy Thornton, and all the staff for the work that has gone into developing this draft strategic plan. I am pleased to support issuing this plan for public comment.

A strategic plan should do more than identify priorities. It should explain how the PCAOB intends to exercise its authority, allocate its resources and measure whether its efforts are advancing the mission Congress gave us: protecting investors and furthering the public interest in the preparation of informative, accurate, and independent audit reports.

In my view, this draft plan moves us in the right direction.

It recognizes that effective oversight requires both strong investor protection and disciplined regulatory decision-making. Those objectives are not in tension. Clear, durable, and well-analyzed regulation strengthens audit quality. It helps firms, auditors, audit committees, and investors better understand what the PCAOB expects, why we are acting, and how our actions support reliable financial reporting.

I want to focus on three themes reflected in the plan: regulatory clarity, costs and benefit discipline, and effective use of technology and data.

First, regulatory clarity. The PCAOB is most effective when its expectations are understandable, consistent, and tied to the risks that matter most to investors. The Board’s expectations for auditors should be clear. Investors and audit committees should be able to understand what our oversight findings mean. And the public should be able to see the principles that guide our decisions.

Clarity is particularly important in our inspection program. Inspection reports are among the PCAOB’s most visible tools. They should provide meaningful information that is timely, relevant, and understandable. If inspection reporting is too delayed, too opaque, or too difficult to compare across firms, it loses much of its value. The plan’s emphasis on improving inspection report clarity and timeliness is critical. It is an important step toward making our oversight more useful to investors, audit committees, and other market participants.

The same principle applies to enforcement. Enforcement is essential to accountability and deterrence. But it is most effective when the Board is clear about the types of conduct that warrants the most significant attention. A sharper focus on matters that present significant risks to investors and market integrity will help ensure that enforcement resources are directed where they can have the greatest public benefit.

Second, cost-benefit discipline. Every regulator should ask not only whether a rule, standard, inspection approach, or program is well-intentioned, it should also ask whether that action is likely to produce benefits that justify its costs. These costs are not limited to dollars spent by audit firms. They include demands on talent, time, systems, audit committees, issuers, and ultimately investors. The benefits must also be carefully evaluated, including improvements in audit quality, reliability of financial reporting, investor confidence, and capital market efficiency.

As an economist, I am encouraged that the draft plan recognizes that cost-benefit discipline should be embedded throughout the PCAOB’s work. That includes standard setting, implementation, post-implementation review, inspections and other oversight activities.

That discipline does not weaken investor protection. It strengthens it.

Regulation that is evidence-based, proportionate, and capable of being implemented effectively is more likely to improve audit quality in practice.

I am particularly encouraged by the plan’s commitment to post-implementation evaluation. Once the Board adopts a standard, our work is not finished. We should ask whether the standard is working as intended and improving audit quality. We should also consider whether guidance or clarification is needed and whether costs and implementation burdens are consistent with what the Board anticipated. That feedback loop is essential if we want our standards to remain effective and credible over time.

Third, technology and data. I support the plan’s recognition that technology and data can play in modern oversight. But technology should not be viewed as an end-in-itself. The goal is not modernization for modernization’s sake.  

Technology and data should help us make better regulatory judgments. They should improve risk identification, strengthen the evidence base for our decisions, and make our oversight more timely, effective, and consistent. As the PCAOB considers significant investments in technology, data, and AI capabilities over the coming years, it will be important to remain focused on the outcomes those investments are intended to achieve and how they advance our mission of investor protection.

Ultimately, the value of these investments should be measured not by the sophistication of the tools we deploy, but by whether they help us make better decisions, improve oversight, and deliver better outcomes for investors.

Technology investments should be subject to the same discipline we apply to standards, inspections, and enforcement programs. We should be able to explain why an investment is necessary, what problem it is intended to solve, what benefits are expected, what risks it creates, and how we will determine whether it was successful.

A strategic investment is not defined by how much money is spent, but by whether it produces measurable improvements in investor protection, audit quality, and organizational effectiveness.

Finally, I appreciate that this draft plan invites public comment.

The PCAOB benefits from hearing from a broad range of stakeholders who experience the effects of our work from different perspectives. Input from investors, audit committees, auditors, preparers, academics, and others can help us sharpen our priorities, identify unintended consequences, and improve the final plan.

A strategic plan is most effective when it provides a clear framework for action, accountability, and measurement. Public input will help ensure that this plan does exactly that. For these reasons, I support issuing the draft strategic plan for public comment. Mr. Chairman, thank you.