Statement on the PCAOB 2018 Budget and Related Strategic Plan

I support the 2018 Budget and 2017-2021 Strategic Plan before us today. This budget and strategic plan provide the direction, guidance, and resources needed to achieve an efficient and effective approach to fulfilling our mission. They also position the PCAOB to address new and emerging risks and issues facing the auditing profession and the interests of investors that auditors serve.

The proposed 2018 Budget of $259.9 million represents a 3.2 percent decrease ($8.6 million) compared to our 2017 Budget. It also reflects a decrease of 34 staff positions compared to our budgeted staffing level in 2017.

The PCAOB began its budget planning process early this year by initiating an effort to assess the efficiency and effectiveness of our programs and activities, and we started a comprehensive process of evaluating staffing levels and allocation. We have begun to incorporate these processes into our annual and regular planning cycles, contributing to significant savings this year. In fact, our estimated spending for 2017 is projected to be about 4.3 percent ($11.7 million) below our 2017 Budget. The 2018 Budget has been constructed to reflect a continuation of many of the cost savings and efficiencies that we implemented in 2017.

The PCAOB needs to continue the efforts started in 2017 by taking further steps to formalize those processes going forward using additional tools such as outcome-based performance measures, a formal workforce plan and staffing methodology, program performance evaluations, and other empirical analyses.

I am encouraged that the PCAOB continues to move forward on modernizing its approaches to investing in human resources and technology.[1] Our compensation framework, workforce planning evaluations, employee engagement program, diversity and inclusion program, and our investments in technology and security will benefit our talented and dedicated staff and the investing public that they serve as business dynamics and technology continue to evolve.

The strategic plan and budget reiterate a commitment to developing a formal data management strategy that will contribute to enhance economic and other policy analyses, with the added benefit of fostering internal collaboration and coordination. This responsibility is within the function of the newly merged Office of Economic and Risk Analysis (ERA). The 2018 Budget increases ERA's staffing level from current levels. I look forward to meaningful progress in PCAOB's data management strategy, as data management and analysis is critically important to the economic analysis in our standard setting and rule-making as well as basic policy analysis and decision-making.

The PCAOB remains steadfastly focused on protecting investors and advancing the auditing profession's service to the public trust. Audit quality and the marketplace's understanding of audit quality are at the center of that mission.

The PCAOB is tackling long-standing audit quality issues while advancing its oversight and standard-setting programs in light of emerging trends that may drastically impact auditing in the future.

As the Board continues to mature as a nimble and agile organization under a relatively stable size and structure,[2] the opportunities and risks facing auditors and the investors they serve continue to rapidly evolve.

The strategic plan and budget before us today acknowledge those opportunities and risks, and prepare us to confront them head-on. These include: rapidly evolving technology that auditors and their clients (and their regulators) use, along with security threats they pose; changing workforce dynamics and demographics; global and domestic economic, political, and regulatory trends and changes; other pressures and changes in the audit marketplace; and evolving needs of investors for useful information.

The PCAOB should be well-situated to advance its mission to protect investors and advance the public interest in this environment while working to enhance the effectiveness and efficiency of our programs and operations.

In closing, I offer my thanks to the staff for their efforts in developing the strategic plan and budget before us today. I would also like to thank the SEC staff for their questions, comments, and feedback during the process.