Advancing Our Mission Through Thoughtful Budgeting

Thank you, Chair Williams.

I believe that our 2024 budget reflects the resources that we need to advance our mission of investor protection; a mission that is critical to sustaining trust in our approximately $57 trillion U.S. capital markets. 

Over the past almost two years, the PCAOB has been assertively executing against the objectives outlined in our Strategic Plan. While the PCAOB has taken great strides to better protect investors, results from our Inspections and Enforcement programs suggest that we must remain steadfast in pursuing our mandate. 

To rise to the challenges ahead, including growth in the capital markets, rising deficiency rates in inspections, evidence of egregious ethical lapses reflected in enforcement matters, and evolving technologies in auditing, our resources must meet the moment. 

As such, I am in full support of the PCAOB’s 2024 budget of $384.7 million, an approximately 11% increase year over year. Among other things, this budget will enable us to further enhance our inspections, further strengthen enforcement, modernize more standards, including interim standards that have not been revamped since the PCAOB opened its doors in 2003, and continue radically improving the organizational effectiveness. 

This budget appropriately prioritizes compensating our people and progressing our technological capabilities. 

In the past two years, I have been able to bear witness to the dedication and expertise of the PCAOB staff. We are fortunate to have a highly-skilled workforce with extraordinary technical acumen. Given that, a significant portion of the increase in this year’s budget reflects the inherent cost of doing business year-over-year in order to retain our exceptional staff, including maintaining competitive pay and benefits. The caliber of talent we attract is critical to further advancing our mission and driving improved audit quality. 

In addition to our people, to increase the effectiveness and efficiency of our regulatory programs, the PCAOB must progress its technological capabilities.  As such, I fully support upgrading mission-critical systems beginning in 2024, including improvements to our registration and inspection systems. These investments will reinforce our regulatory impact.

Through our Inspections Program, we are making an impact. As noted in our Strategic Plan, inspecting registered audit firms is one of the most important ways that the PCAOB can seek to protect investors. Our inspectors are the boots on the ground and annually inspect over 800 issuer audits in over 30 jurisdictions around the world. 

Our inspection responsibilities continue to grow, especially considering an increase in the number of firms that must be inspected annually, additional inspections in the jurisdictions of China and Hong Kong, and anticipated audit firm implementation of our modernized standards. I believe our budget must reflect these increased responsibilities to drive improved audit quality.  

Our Enforcement Program is also making an impact. We have rigorously held firms and associated persons accountable for violations of PCAOB rules and standards.  In 2022, the PCAOB exacted the highest amount of total civil monetary penalties in history, approximately $11M, for behavior that harmed investors and put our capital markets at risk. And, as Chair Williams noted, this year we have already surpassed that historical amount. Consistent with our Strategic Plan, I believe this budget equips our staff to continue pursuing significant cases involving wrongdoing to deter future violations.

Now let me shift to standards-setting and rulemaking; we continue to tackle large projects to modernize dozens of our interim standards and rules. The auditing profession has radically evolved since the original adoption of many of the existing audit requirements. We must ensure that our standards and rules are fit for purpose and contemplate current auditing practices and promote innovation.   

Finally, we want to continue radically improving our organizational effectiveness. This includes the Board’s priority of enhancing external stakeholder engagement. In this regard, the Board remains committed to considering the perspectives of the Investor Advisory Group, the Standards and Emerging Issues Advisory Group, audit committee chairs, and preparers of financial statements; such perspectives inform our regulatory deliberations, including our standards-setting and rule-making activities. The impact of these engagements improves our effectiveness in carrying out our mission.

The PCAOB’s role in the capital markets was established by Congress. For more than 20 years, we have been pursuing our mandate to protect the interest of investors and further the public interest in the preparation of informative, accurate, and independent audit reports. 

We must remain intensively focused on the magnitude of our role in the financial ecosystem. As such, we must ensure that the PCAOB remains appropriately resourced to meet the purpose for which it was created.

Joining my fellow Board members, I would also like to applaud the contributions of the PCOAB staff in our Office of the Chief Operating Officer, including Jamey McNamara, our COO, Holly Greaves, our CFO, and Jim Hearn, our Budget Officer, and the rest of the outstanding budget team. 

Additionally, thank you to those across the PCAOB’s divisions and offices who have played an integral role in developing our 2024 budget. 

Lastly, I would also like to acknowledge the SEC staff, the Chair’s office, and my staff for their assistance and support.