Good morning and thank you for the kind introduction. It is a pleasure to come home to St. Joe's today. There is no better place for me to speak. Coming back to Hawk Hill brings back many fond and long-time memories.
I would like to thank Dean D'Angelo and my friend and former teammate, Professor Larkin, for extending me the invitation. I would also like to thank Mike Colgan and PICPA for being a part of today. I have been a proud member of the PICPA for over 35 years.
Where We've Been
It's been 15 years since the PCAOB's creation. We were established by the Sarbanes-Oxley Act of 2002 to oversee the audits of public companies in order to protect the interests of investors and further the public interest in the preparation of informative, accurate, and independent audit reports. Our jurisdiction is both domestic and foreign. Approximately 1,900 public accounting firms are currently registered with us. Nearly 1,000 are domestic and the remaining 900 are foreign. We have four primary duties:
- Registering public accounting firms that prepare audit reports for issuers, brokers, and dealers.
- Establishing auditing standards.
- Inspecting registered firms' audits and quality control systems.
- Investigating and disciplining these registered firms and their associated persons for violations of auditing standards.
We also conduct economic research and risk analysis and engage with our stakeholders and other domestic and international regulators. We manage a talented workforce and the technology and resources we need to perform our duties.
New Board, New Day
I think we can all agree that the PCAOB's existence has led to greatly improved audit quality for public companies and broker dealers. In a 2018 survey, investors named independent auditors as the most effective entity in their investor protection roles, with 81 percent of investors expressing confidence. However, that number is down 3% from 2017.
Therefore, we must ensure the PCAOB is functioning effectively in our ever changing environment. We need to position ourselves to be innovative so that we can anticipate and respond to changes rapidly. To figure out how to do that, the Board is taking a fresh approach to our mission and how we are developing our strategic plan to achieve that mission.
I want to talk to you about this approach and cover some of the initiatives associated with it, such as technology and innovation (topics close to my heart), review and evaluation of the inspections process, and assessing the current standard-setting process and agenda.
I will also talk about some issues that may be of particular interest to you such as the implementation of the new standard for the Auditor's Reporting Model (or ARM) and related Critical Audit Matters (or CAMs); the impact of new accounting standards; and current inspection trends. Time permitting, I will also talk about the future of the auditing profession and the PCAOB scholarship program.
Strategy: A Clean Sheet of Paper
For first time since the PCAOB was created in 2003, we have an entirely new set of Board members. Once we were all in place earlier this year, we took a clean sheet of paper and drafted a five-year strategy. Of course, the Board has done this before, every year since 2007 actually. This time, however, we did it differently. We hired a consultant and conducted both an internal and an external survey.
The surveys were incredibly successful, yielding feedback from a wide range of respondents: audit firms, financial statement preparers, audit committees and board members, investors, regulators and of course academics. Thank you to all of you who participated in our outreach.
Through the surveys, we heard that we should:
- Streamline inspections;
- Make the inspection process more transparent;
- Provide more guidance on how to comply with our standards;
- Evaluate those standards to reflect changes in technology;
- Adopt a more efficient standard-setting process; and
- Conduct more external outreach.
Creating the Strategic Plan
Based on all of that feedback we drafted the strategic plan. Then, for the first time ever, we published the draft plan for review and comment. In terms of details, you'll see from the proposed plan that our mission is the same as always — to oversee the audits of public companies and SEC-registered brokers and dealers in order to protect investors and further the public interest in the preparation of informative, accurate, and independent audit reports.
Based on the input we received and our own analysis, we are focusing our strategy in four areas:
- Enhancing our approach to driving continuous improvement in audit quality and more clearly communicate how we are driving that improvement.
- Being more innovative in our oversight activities and at the same time prepare for significant market-driven changes in the audit profession.
- Engaging more often and more directly with stakeholders to promote robust and timely dialogue regarding the quality of audit services.
- Optimizing our operations and enhancing the culture of our organization.
The Board proposed five goals for itself to help implement the new strategy. The first goal – directly reflecting our mission – is to drive improvement in audit quality. To do this, we must focus not only on detecting audit deficiencies, but also preventing them from occurring in the first place. For this, we will need to take a forward-looking and balanced approach as we carry out our oversight activities.
We should conduct inspection activities to facilitate more timely and relevant feedback to our stakeholders. The information the PCAOB provides to the public and its stakeholders must be relevant and, to be relevant, it has to be timely. An inspection report that is published two years after an audit has occurred is not relevant.
The second goal is to anticipate and respond to emerging technologies and related risks and opportunities. Advancements in technology are continuously affecting how and when financial information is being generated and used. We understand how innovative auditing firms are being and how important it is for the PCAOB to understand the impact of that innovation on the quality of audit services. This is important so we do not inadvertently impede innovation as we work to accomplish our mission.
In addition, we need to better understand the needs of our stakeholders. A substantial opportunity exists for the Board to engage more often and more effectively with investors, audit committees, preparers, registered firms, standard-setting organizations, academia, and other audit regulators. Therefore, we have set a goal to enhance transparency and accessibility through proactive stakeholder engagement.
The Board's fourth goal is to pursue operational excellence through efficient use of resources. This includes increasing and optimizing our information technology investments to strengthen our capabilities. Almost anyone who's worked with me since I started at the PCAOB earlier this year will tell you that I am passionate about increasing the PCAOB's investments in information technology – we must improve the user experience. We must technology enable our workforce and go mobile.
The Board's fifth goal is to develop, empower, and reward our people. This is key to any effective organization. PCAOB staff is deeply committed to our mission. Going forward, we will collectively reinforce a culture that expects integrity, pursues excellence, operates with effectiveness, embraces collaboration, and demands accountability.
Comments on the Draft Strategic Plan
The 30-day period to comment on the draft strategic plan closed on September 10, 2018. We received 31 comments. Thank you to those of you who commented. Your comments and feedback were valuable and confirmed that our draft plan is on point. We hope to finalize the strategic plan in an open meeting in November at the same time that we adopt our 2019 budget.
Commenters included investors, audit firms, issuers, academics, trade organizations, and other regulators. Almost all of the commenters expressed support for the draft plan. In particular, we heard agreement that audit quality has improved with the PCAOB, but more needs to be done. We heard that our focus on how innovation and emerging technologies will affect the audit and auditing standards was right on point. We also heard that engaging more often and more openly with our stakeholders is of utmost importance.
Commenters also suggested ways to improve the plan. For example, we were asked to place more emphasis on the inspections reporting process. This is what we report and how we report it. Others would like to see a commitment to regular assessment of our various oversight activities. Still, others requested that we be more explicit in including other standard-setters in our outreach and engagement efforts. Many commenters also made suggestions on how the PCAOB should implement the plan once it is finalized. Some of the areas covered in those comments were the advisory groups, PCAOB guidance and publications, and implementation and review of new standards.
The Board is carefully considering all of these comments as we prepare to finalize the strategic plan later this fall. We also will continue to consider the comments as we implement the final plan over the next few years. It seems based on comments, though, that we're on the right track. So, not wanting to waste any time, we've begun to work toward achieving our goals. One of those ways has been through the recent appointment of two new Directors:
- George Botic will be our Director of the Division of Registration and Inspections; and
- Liza McAndrew Moberg will lead the Office of International Affairs.
We still have a number of additional senior leadership roles to fill. We are being careful and considerate in the hiring process for them. Currently, we are reviewing the many applications we received and are interviewing prospective candidates. We hope to complete the process by the end of this year. In the meanwhile, we have the utmost confidence in the staff that has stepped into those roles on an acting basis.
As I just mentioned, we are an entirely new Board. In composing us, the SEC was incredibly thoughtful – making sure we represented a spectrum of viewpoints, competencies, and experience. Our backgrounds include: investors, preparers, registered firms, academia, financial regulation, and legislation and policy-making. These are all relevant to the PCAOB's mission of improving audit quality.
To fully realize the potential of such a broad spectrum of viewpoints and experience, Chairman Duhnke has created "Board champions" to facilitate transformation in specific areas.
I was an auditor for 38 years before coming to the PCAOB. For over 25 of those years, I was an audit partner. I also led a team that developed global digital audit strategy and operated the audit technology platform. My background in conducting audits and the use of technology by audit firms helps me in my role as the Board champion or co-champion for inspections, standard-setting, and technology.
There are numerous projects within the Inspections transformation initiative - some are more short-term to take benefit of the low hanging fruit, while others are more long-term focused. Currently, it contains 16 projects or work streams with dedicated Inspections staff. We have assigned over 30 staff to the projects. Select staff have been assigned full time for two years. Additionally, a new senior-level position will be established to lead the transformation initiative.
We believe now is an excellent time to take a hard look at how we approach our inspections and how we report their results. In fact, one of our strategic goals focuses on regularly assessing our inspections approach. If there are changes we can make to more effectively promote audit quality through our inspections program, we will actively and carefully consider them.
We are reviewing the entire inspections eco-system; it's essentially "back to basics": right from the very purpose of inspections to the inspections approach and process. This includes planning, report writing, remediation, root cause analyses, the QC standards, and procedures. For example, we would like to be more timely, relevant, and balanced in our inspection reports and other communications.
This is particularly important as we advance our desire to be, not just detective, but preventive as well. I believe one way to achieve this would be to develop an agreed upon set of Audit Quality Indicators or AQIs. Including standard AQIs in future inspection reports could make those reports more balanced than they are today.
A series of outreach meetings with other regulators both domestic and foreign will be conducted to understand their respective inspection approaches. Technology impacts the way audits are done. It will also impact the way we do inspections. We will update our Inspections technology platform. We will also adapt our approach based on the nature and size of the firm.
As needed, we will also use resources outside the PCAOB to assist with certain transformation initiatives. This will maximize learning and the effect of the transformation as well as increase innovation and foster continuous improvement. In addition, we expect to increase our interaction with audit committees during the 2019 inspection process. We view an informed and engaged audit committee as crucial to achieving continuous improvement of audit quality.
There are also transformation initiatives within our standard-setting function. Today the development of new standards can take up to three years or longer. I believe we should conduct a review of this process. It will not only focus on the time to develop a standard but also how we communicate the pronouncement. For example, currently the release text can be nearly as long as the standard. In addition, I believe we should use other forms of Board communication in the standard-setting space. This could include more frequently published guidance, staff reports, and practice alerts. Currently, we provide informal consultations to the public on how to interpret our standards. We may need to consider a more formal consultation process.
Data and Technology
Current and emerging technologies are another area of focus for transformation. Technologies, including advancements such as those in data analytics, machine learning, blockchain, and robotic process automation or RPA, are rapidly changing the business environment and how information is generated and shared.
Companies and audit firms are making significant investments into these and other technologies. Such innovations have the potential to improve the financial reporting process. They have the potential to improve the auditing process. However, use of these technologies will also come with its own unique set of risks. As discussed in our draft Strategic Plan, this will be an area of focus for us.
The PCAOB already has a research project to assess the impact of the use of new technologies on the audit and audit quality. The research project will also assess whether the Board's standards impede the use of technology in audits. If so, we will decide whether rulemaking or other actions by the Board or staff are needed.
Based on current firm technology and our discussions with firms, the existing standards do not impede the use of technology. This makes sense as current technologies are primarily focused on risk assessment. The use of algorithms and blockchain, however, will become more commonplace in audits. The utilization of such technologies will have a greater impact on audits. We will closely follow these developments to provide the necessary guidance and develop or change guidance and standards.
There is also a relatively new Data and Technology Task Force. It was established as part of the Standing Advisory Group in 2018. The Task Force has 11 members - two academics, four SAG members with experience on audit committees and/or as investors, and five auditors. The Task Force assists PCAOB staff in obtaining insights into the use of data analytics and certain emerging technologies, not only by auditors but also by companies.
The Task Force had two meetings in May and October where the members established data analytics and artificial intelligence as their priorities going forward. The discussions helped staff confirm its view that our standards are not affecting how audit firms are currently using technology. The Task Force expects to next move into a discussion of how audit firms expect to use technology in the future and the potential impact that would have on standard-setting.
Academic task force members are providing views on recent academic research papers and publications. Audit committee and investor task force members are providing views on how they evaluate auditors' use of technology. They are also providing views on how the use of technology affects their assessment of audit quality. Auditor task force members are providing examples from current practice of the use of data analytics and artificial intelligence. These examples can help answer questions about such things as how data analytics are used in performing risk assessment procedures. They can also answer questions about what type of documentation is prepared and retained. Going forward, the Task Force hopes to determine where we are today and then will set its sights on tomorrow.
As we continue on the transformational journey around technology and innovation, I believe we will also leverage academia, thought leaders, and technology companies to assist us in further developing our thinking in response to this new environment.
As we embark on our new strategic plan, we are also conducting business-as-usual. In that regard, let's turn to standard setting. I want to give you an update on our current agenda, talk about implementation of ARM, and share my thoughts on the forward agenda.
The current standard-setting agenda includes proposals on Specialists; Auditing of Estimates; and Supervision of Other Auditors. The new Board has devoted substantial time and made meaningful progress to date in understanding the judgments made by the prior Board and the policy objectives of each of these proposals.
Auditor use of the work of specialists to assist in the audit process is increasing. These amendments are intended to enhance investor protection by strengthening the requirements for evaluating the work of a company's specialist. They would apply a supervisory approach to both auditor-employed and auditor-engaged specialists. The amendments are designed to be risk-based and scalable. I hope that the PCAOB is able to adopt this standard by late Q4 2018.
The continuing evolution of financial reporting frameworks has increased the prevalence and significance of accounting estimates. This includes estimates based on fair value measurements. The Board has also proposed amendments to standards for auditing accounting estimates and fair value measurements. Three existing standards, adopted in 2003, would be replaced with a single, updated standard. The new standard, if adopted, would require application of a more uniform, risk-based approach. It would be fully integrated with the Board's risk assessment standards. The previous standards were not fully integrated with these given the timing of when they were adopted. I would hope that the PCAOB could also adopt this standard by late Q4 2018.
On Supervision of Other Auditors, we have received comments on our Supplemental Request for Comment. Our staff is currently addressing them. It is my hope that we would adopt this release in the first half of 2019.
Keep in mind that, for all of these, the SEC must do its own due diligence. This includes opening up the proposal for a separate comment period, responding to those comments, and taking action.
We also have several items on the forward standard-setting agenda. These are in addition to the data and technology research project I discussed earlier. The first is quality control standards. The current QC standards have been in place since the mid-90s. This means they were in effect in 1997, when the world's most valuable company was valued at only $261 billion. Today the world's most valuable company is worth over $1 trillion.
So time has passed. Businesses have globalized. Firm structures are changing. Marketplace expectations and technology are evolving. There is a need to update these standards. Our research team is thinking about leadership and governance, firms' root cause analysis and remediation, protection of data, and assessing and responding to risks to the effectiveness of the QC system. Stay tuned!
Another item on the forward agenda is the Auditor's Role Regarding Other Information and Company Performance Measures, Including Non-GAAP Measures. Companies are including new performance measures in their annual reports, registration statements, earnings releases, analyst calls, and company websites. Some of these new measures include non-GAAP and operating measures. With this comes increasing expectations from auditors. I believe we should reevaluate whether there is a need to revise the standards in this area. If there is a need, we should evaluate how to change the auditor's existing performance and reporting responsibilities. Our Staff is summarizing its research findings and is developing recommendations for next steps for Board consideration.
The Auditor's Reporting Model
So that's what's on the agenda. Now let's talk about something that is already adopted and will be coming into effect. That means the Auditor's Reporting Model or ARM. The current audit report is essentially a pass/fail opinion but it does not convey anything about how the auditor got to that opinion. Any investor reading the report has no idea about the challenging matters the auditor had to deal with and the judgments the auditor made.
To remedy this and to enhance the value provided by an audit report, last year we adopted the auditing standard on the new Auditor's Reporting Model or as we call it, ARM. It is the biggest change to the auditor's report since the '40s. Beginning in the second half of next year, audit reports for Large Accelerated Filers will include Critical Audit Matters or CAMs. For others, CAMs will be effective in 2020.
CAMs are meant to make the auditor's report more useful by providing additional and important information to the users of the financials. They will inform users of tricky audit matters that the auditors had to deal with and how the auditors addressed these matters. CAM determination is principles-based. It begins with audit matters that were communicated or required to be communicated to the audit committee. CAMs must relate to a material account or disclosure in the financial statement. To be a CAM the matter should be challenging, subjective, or involve complex auditor judgment.
Our ARM initiative is consistent with the broader international movement towards expanded auditor reporting and disclosure of Key Audit Matters also known as K-KAMs. Even though the definitions and criteria for identification of CAMs/K-KAMS are slightly different, both have similar objectives and reporting requirements.
CAM implementation efforts are underway. Larger firms have conducted pilot programs on a few issuers and will soon complete more extensive dry-runs. We believe that firms with smaller audit clients can learn from the process followed by larger firms in Year 1. Preparers and audit committees should ensure their companies participate in a dry run with their auditors in the year before the adoption of the new standard.
At the PCAOB, we are discussing firms' plans and monitoring firms' efforts through inspections. We will perform an interim analysis on the implementation of the standard between the two effective dates. We will also work with the Securities and Exchange Commission's Office of the Chief Accountant and Division of Corporation Finance to inform our approach and evaluations of observations related to CAMs.
In 2018, our Inspections staff is gathering information to understand what actions the firms may be taking to implement the new reporting requirements. They are also discussing the results of firms' pilot programs and reviewing methodologies. In terms of audit committees, Inspections staff is engaging with them to understand their level of involvement in the firm's implementation efforts. Staff is also asking for audit committee views on the costs, benefits or unintended consequences of the new reporting requirements.
As I just mentioned, auditor reporting in some jurisdictions outside the United States has already been expanded to include the communication of key audit matters (or K-KAMs). We have some insight into what audit regulators are seeing in other parts of the world. One observation we heard frequently was that there were gaps or inconsistencies between responses described in the audit report and the work that was actually performed by the audit team.
There have also been a few studies on implementation of K-KAMs. ACCA, the global professional accounting body, analyzed more than 560 audit reports from numerous countries in the first year of adoption of K-KAMs. ACCA found that audit reports generally included two to four K-KAMs. Revenue was the most common K-KAM, and was included over 50% of the time. They also observed that certain matters were disclosed more frequently in particular industries. For example, for telecoms, the most common K-KAMs were revenue recognition, tax, and goodwill impairment. For banks and financial services issuers, it was asset impairments and financial instruments.
New Accounting Standards
Let's talk about some new accounting standards – some of these are currently in effect and others will be effective in the next two to three years. The new accounting standards for Revenue Recognition and Leases are effective in 2018 and 2019, respectively. We provided training to our staff and established a group of subject matter experts. In 2017 and 2018, we were also busy talking to firms about what they have done to prepare their staff for these changes.
In 2018, we have continued to discuss with audit teams how they are addressing accounting changes with their clients. Inspections staff also included a selection of issuers who early adopted the revenue. These result from this will help inform our approach in 2019, and more importantly, will allow us to raise issues with firms and practitioners early so that concerns may be addressed.
Also front and center these days is the new standard for Current Expected Credit Loss or CECL that was introduced in June 2016. The CECL effective date for issuers is 2019. Then we also have the FASB's latest update for insurance companies that issue long-duration insurance contracts. This standard will be effective for calendar year-end public companies in 2021.
For auditors who are looking for guidance on how to approach these new auditing standards, consider Staff Audit Practice Alert No. 15 (SAPA 15) on Auditing Revenue, which was published in October 2017. It highlights PCAOB requirements and other considerations for audits of a company's implementation of the new revenue recognition accounting standard.
I encourage preparers, auditors, and audit committees to read this alert as this is a valuable resource and tool. Much of the guidance is applicable to the implementation of other new accounting standards as well.
Our Inspections staff has been very busy. In 2017, they examined portions of nearly 800 issuer audits and reviewed the system of quality control at more than 190 firms. Overall, the number of audit deficiencies identified in the engagements inspected in 2017 appears to be about the same for some firms and increasing for others from the 2016 inspections cycle.
Not all firms are in the same place. There seems to be a plateauing of the deficiencies since 2016. The 2017 inspection results also indicate continued audit deficiencies in audit work regarding multinational audits, non-compliance with PCAOB rules and/or SEC rules and regulations related to auditor independence and areas affected by certain economic risks, such as mergers and acquisitions, the low interest rate environment, and fluctuations in oil and natural gas prices.
The most frequent audit deficiencies identified continue to be in the same three key areas we have discussed over the past few years:
- Auditing internal control over financial reporting or ICFR;
- Assessing and responding to risks of material misstatement; and
- Auditing accounting estimates, including fair value measurements.
Audit deficiencies have been most frequently observed in auditing of the following financial reporting areas:
- Impairment of long-lived assets;
- Financial instruments;
- Allowance for loan loss; and
- Business combinations and debt and equity instruments.
We are gathering information to understand the procedures performed and documentation prepared by auditors as they determine whether certain cybersecurity risks pose risks of material misstatement to the company's financial statements.
We are also gathering this information to understand whether modifications to the auditor's risk assessments and planned audit approach occurred or were necessary in response to these risks.
Under PCAOB standards, the auditor should obtain an understanding of the specific risks to a company's internal control over financial reporting resulting from information technology. This may include risks of unauthorized access to data that might result in destruction of data or improper changes to data, such as reporting of unauthorized or nonexistent transactions or inaccurate recording of transactions.
The auditor also has a responsibility to respond to the assessed risk of material misstatement. If cyber incidents have occurred during the audit period, it is important for auditors to consider whether there are:
- Any effects on the financial statements, including disclosures; or
- Implications for internal controls over financial reporting.
Update on Interim Inspections Program for Broker-Dealer Audits
2018 is the fourth year since PCAOB standards have applied to broker-dealer audit firms. Our 2017 Report and Highlights Summary are on the website. To give you a few stats: deficiencies continued to remain very high and many of those observed were consistent with prior years. Deficiencies were identified in 91% of firms inspected. That's down only slightly from 97% in 2016.
So what is the PCAOB doing to improve audit quality in the broker-dealer space? We know that our inspection approach and frequency of inspections make a difference. We observed that firms that have been inspected before have better results than those that have never been inspected. We also observed that generally more touch-points with the PCAOB corresponded with better inspection results – meaning, fewer deficiencies. So we planned our inspections to cover new firms: in 2017, approximately two-thirds of the firms selected had never been inspected before.
In addition, in the last couple of years, we've escalated the level of QC-related inspection procedures we perform. This includes a wider scope of procedures and performing these expanded procedures at more firms.
Finally, we are trying to educate this segment of stakeholders. PCAOB hosts in-person meetings – called BD Forums – and online sessions for Auditors of Broker-Dealers. Forums are full-day events and Webinars usually run an hour. These are offered at no cost to attendees and give participants the chance to learn about and discuss relevant PCAOB issues. The Forums also provide a platform for the firms to meet with the Board and Board staff. In 2017, we held two BD Forums and one Webinar. In 2018, we've planned to host three BD Forums. I will be attending one tomorrow in Jersey City.
The interim inspection program for auditors of brokers and dealers informs the Board's consideration of establishing a permanent inspection program. In particular, it helps the Board assess whether to differentiate among classes of brokers and dealers. It also assists the Board's decision making related to whether to exempt any category of public accounting firms. And it informs the Board's thinking on the establishment of minimum inspection frequency schedules.
Under the current interim program, we perform all procedures that we would likely perform under a permanent program, except the issuance of firm-specific reports. Firm-specific reports would trigger the related remediation process.
Future of the Profession: Auditor+
I wanted to spend a few minutes on the future of the profession. According to the Bureau of Labor Statistics, accounting jobs are projected to grow 10% by 2026, faster than the average for all occupations. Auditing is incredibly dynamic with many opportunities for people with the right combination of skills.
Improved technology helps focus the areas of risk; but we still need humans to evaluate those risks. Those humans need multi-disciplined skills, not just accounting and auditing. There is an increasing need to have capabilities and specialization in data analytics and other technology-based areas. It's accounting plus.
In the auditing profession specifically, large firms want auditors with more advanced data analytics capabilities who can apply professional judgment and skepticism to evaluate output from algorithms and other data sources. Some of our country's top-ranked accounting programs are moving in this direction. One such program offers a course in "Data Analytics in Accounting." Another offers "Predictive Analytics and Data Mining." Still another offers a Master of Accounting, Emphasis on Data & Analytics.
When all is said and done, though, the auditor of the future will still need what I'll call "soft skills." First and foremost are professional judgement and skepticism. These are essential individual capabilities. Leadership skills including motivating staff, delegating responsibility, and taking responsibility are also key. Next is relationship-building with all stakeholders. Finally, is the ability to communicate effectively. Of course you can't lead or build relationships without being able to communicate effectively. This means being able to engage one-on-one and within and across groups, and to be able to do so in-person or by email, phone, or social media, or by simply listening.
PCAOB Scholarship Program
Many of you may not know – the PCAOB not only drives audit quality through registration, standard-setting, and enforcement. The PCAOB fosters practitioners from the very beginning of their auditor journey. We do this by offering a merit scholarship for students in accredited undergraduate and graduate accounting degree programs.
By statute, monetary penalties imposed by the PCAOB in enforcement actions must be used to fund these scholarships. Using a predetermined process, schools are chosen to nominate scholarship candidates. Schools are encouraged to consider students from populations that have been historically underrepresented in the accounting profession.
We recently announced the PCAOB will award a $10,000 scholarship to one student each at 332 colleges and universities for the 2018-2019 school year. It is the eighth year the PCAOB has funded scholarships. Since the program's inception in 2011, the PCAOB has awarded nearly 1,000 scholarships for a total of $9.3 million. In the state of Pennsylvania, 33 scholarships, in total, have been awarded to students since this program started in 2011.
This is an incredible program that I believe can be even more incredible with:
- Increased public awareness of its existence;
- Consideration of certain changes to the program such as announcing the names of the individual recipients (currently, only the school names are announced); and
- Evaluating the scope and frequency of schools that receive the vast majority of scholarships beyond the 150 institutions with the highest total number of degrees in accounting.
Thank you again for having me here today. This is a very exciting time to be a PCAOB Board member. We are committed to collaboration. We aim to be as transparent as possible through outreach and increased communication. The Board's collective speaking schedule for this fall demonstrates outreach is a priority of ours.
You will hear from us and we want to hear from you. The changes that happened to get us where we are today did not happen overnight. Nor will the changes that are necessary to bring us into the future.
 The views I express today are my personal views and do not necessarily reflect the views of the Board, any individual Board member, or the staff of the PCAOB.
 Main Street Investor Survey, Center for Audit Quality (September 2018) at https://www.thecaq.org/2018-main-street-investor-survey.
 International Standard on Auditing (ISA) 701, Communicating Key Audit Matters in the Independent Auditor's Report.
 ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326).
 ASU No. 2018-12, Financial Services—Insurance (Topic 944).
 Bureau of Labor Statistics, Occupational Outlook Handbook at https://www.bls.gov/ooh/business-and-financial/accountants-and-auditors.htm.