Statement on the PCAOB 2017 Budget and Related Strategic Plan

The 2017 budget and related strategic plan are the result of considerable effort and thought by board members and senior programmatic staff. They reflect careful planning, responsible stewardship, and a deep commitment to the PCAOB's public interest mission.

I want to express my appreciation for the work of our Chief Administrative Officer Suzanne Kinzer, Senior Deputy CAO Bill Wiggins, Budget Officer Jim Hearn, and Bobbie Rose and Alfredo Azocar. I also thank the SEC staff for their support and counsel throughout the year, in particular Interim Chief Accountant Wes Bricker, Deputy Chief Accountant Brian Croteau, and Chief Financial Officer Ken Johnson.

The PCAOB is a vital resource protecting investors and fostering economic resilience by promoting reliable, informative and independent audit reports through effective inspection, enforcement, and standard setting programs.

Accurate and transparent financial audits are a cornerstone to promoting investor trust and facilitating investment that grows capital markets and a healthy economy.

Experience tells us the PCAOB's role is essential and our standards and oversight programs are making a real difference on behalf of investors and companies.

But it is critically important that the PCAOB remain vigilant and independent, because persistent economic pressures can threaten the integrity of audits.

Founded on these principles, the 2016-2020 strategic plan reflects continuation of important work and initiatives begun under previous plans. This updated plan and the 2017 budget will facilitate our efforts to continue to pursue key ongoing strategies designed to achieve our mission.

The 2017 Budget will allow us to conduct rigorous inspections in both the United States and abroad, to meet mandatory annual and triennial cycles applicable to audits of issuers.

It will also allow us to continue to gather information in our temporary broker-dealer audit inspection program and develop a permanent inspection program.

Based on several cycles of the temporary program, I believe we are now well-positioned to seek public comment on a proposed permanent inspection program. That proposal should efficiently focus our resources on the classes of broker-dealer audits that present the greatest risk of investor harm. Refining our approach in light of public comment will be a significant project in 2017, and all the while we'll keep our fingers on the pulse of any changes in audit practices or the industry through inspections.

We will also continue to analyze the potential economic impact of a permanent program. In that regard, we will be considerably helped by the talent and resources that the 2017 Budget will fund for economic and risk analysis.

Our economic and risk analysis program area funds the staff and visiting economists in our Center for Economic Analysis, as well as financial and other analysts in our Office of Research and Analysis. These analysts monitor areas of potential audit risk and produce data, reports and advice on how to address those risks through inspections, enforcement, standard setting or other policy initiatives.

In 2017, I see closer coordination between these two groups, as we expand our use of data analysis and other statistical tools to make all of our programs and policy analysis more efficient.

This is not a growth budget. It assumes the same number of positions as budgeted in 2016. Gleaning insights from data in order to leverage our people resources will be particularly critical.

The 4 percent dollar increase over the 2016 Budget reflects the full-year cost of recent hires; rent payments, standard annual benefit and compensation adjustments and other administrative expenses. The increase also reflects mission-critical increases in information technology and travel for inspections. On the other hand, some cost categories are decreasing, reflecting savings and efficiencies we've achieved with experience.

Nevertheless, we will inspect in more jurisdictions than ever before. We face growing enforcement challenges that undermine investor confidence, and persistent inspection findings of significant audit deficiencies that jeopardize investor protection.

We will also continue to implement a new standard setting process, based on a comprehensive, two-year review of the process from start to finish. The new process recognizes the importance of conducting deep research, outreach, and economic analysis – first to assess the need for a standard-setting project and then, if there is one, to design innovative and cost-effective approaches to address that need.

This is all important work, thoughtfully planned to achieve our mission.

In conclusion, I am immensely proud of the PCAOB staff for their creativity and dedication in developing new techniques to bring to bear in their work, as well as their commitment to identifying the most effective ways to protect investors.

Given all the work and support that has gone into the budget, I am comfortable that it is appropriate and should be submitted to the SEC for its approval.