Chair Williams’ Statement Before the SEC Open Commission Meeting on the PCAOB’s Proposed 2025 Budget

Public Company Accounting Oversight Board (PCAOB) Chair Erica Y. Williams appeared before the U.S. Securities and Exchange Commission (SEC)’s Open Commission Meeting today regarding the PCAOB’s proposed 2025 budget.

Chair Williams’ full remarks before the commission are below as prepared:

Thank you, Paul [Munter] and Caryn [Kauffman], and good morning, Chair Gensler and Commissioners Peirce, Crenshaw, Uyeda, and Lizárraga. It is great to be with you today, and I want to thank you for the opportunity to present the PCAOB’s 2025 Budget for your consideration.

I am obligated to note that I am here today in my capacity as Chair of the PCAOB and my comments do not necessarily reflect the views of other Board Members or PCAOB staff.

Before I start, I want to take a few minutes at the beginning of our time together today to acknowledge that this is likely my last meeting with both Chair Gensler and Commissioner Lizárraga, and I want to thank you both, not only for your support for the PCAOB, but for your decades of public service on behalf of investors.

Chair Gensler, your history with the PCAOB goes back to your work for Senator Paul Sarbanes and helping to craft the Sarbanes-Oxley Act, which as we know, created the PCAOB. As you have said before, “It matters who sets the standards. It matters who ‘audits the auditors.’” ¹

I couldn’t agree more.

Thank you for your many years of dedicated, steadfast work in support of our mission.

Commissioner Lizárraga, I want to thank you, and also your staff, for your commitment to serving hardworking people who are saving for a better future. I wish you, your wife, and your family all the best in the days ahead.

The 2025 Budget is $399.7 million and funds 945 positions across the PCAOB—which is one less position than was assumed in the 2024 Budget. It results in a projected Accounting Support Fee or ASF of $374.9 million, comprised of $346.1 million for issuers and $28.8 million for broker-dealers. While the 2025 budget assumes a necessary increase in the ASF overall, we anticipate the smallest billable issuers will see no increase, while the median difference per bill for issuers will likely be only $100.

The PCAOB’s 2025 Budget reflects the resources required to carry out our statutorily mandated responsibilities and protect investors in U.S. markets by continuing to achieve our strategic goals.

Under this Board, we have made significant progress against our goals, and the 2025 Budget will enable the organization to build upon this success through the dedicated efforts of the PCAOB’s talented and experienced staff.

Inspections

Our inspections program is one of the most important tools we have to protect investors, and more than half of our staff are in our Division of Registration and Inspections. Most of these individuals have decades of experience, and they are serving, quite literally, on the frontlines of audit quality as they build upon our accomplishments.

Specifically, the 2025 Budget will enable our 430 staff in the Firm Inspections Group to continue their outstanding work in conducting domestic and international inspections, including approximately 30 staff that will be executing inspections in Mainland China or Hong Kong.

By the end of 2024, our staff will have inspected 232 audit firms and more than 920 audits across domestic annual, domestic triannual, international, and broker-dealer audits.

These numbers include 79 international inspections of firms and more than 220 audits, including audits of firms in Mainland China and Hong Kong.

We have also made significant improvements this year in issuing our inspection reports in a timelier manner. Prior to this Board taking shape in early 2022, there was a significant backlog of inspection reports from prior years.

In our first year, this Board approved more than 280 inspection reports, representing a 73% increase over the prior year, and the most reports the Board has approved in any given year. I am pleased to report that we have resolved the backlogs and are working to get the inspections reports into the hands of investors and other stakeholders as quickly as possible.

We published the 2023 inspections reports for annually inspected firms in August of 2024–six months faster than last year, and nearly all of the reports for triennially inspected firms were published within six months of the completion of those inspections.

In 2025, we will strive to continue to improve on these results to provide this critical information to the public even faster, so they have the information they need to confidently participate in the markets.

In 2024, we continued to use every tool available to us to drive audit quality, including remediation.

When PCAOB inspectors identify deficiencies in a firm’s quality control systems, firms can take advantage of the remediation process, which gives them a year to correct or remediate the problems before they are made public.

We recently published a supplement to our remediation staff guidance, providing additional direction to firms to facilitate improvements in their remediation activities. The 2025 Budget enables our staff to continue to focus on remediation and engage with firms as they improve their quality control systems.

To further increase our efforts to provide even more information to investors and others, we added charts to our website this year to make it easier to understand and compare inspection results both across firms and over time.

Under this Board, we have also more than doubled the number of staff Spotlight reports which provide valuable insights into how to improve, including highlighting key risks and examples of good practices to follow.

And we recently published the first two installments of “Audit Focus,” a new PCAOB staff publication series aimed at auditors who typically audit smaller public companies. “Audit Focus” highlights applicable auditing standards and provides reminders and good practices specific to auditors of smaller public companies.

This year, our inspectors are seeing significant improvements in the aggregate Part I.A deficiency rate from the largest firms, which we expect to be reflected in our inspection reports next year. Based on these results, it appears the work that I just described is bringing about positive change in audit quality. The resources reflected in this budget will provide our staff with the ability to continue their great work in this area.

Standards and Rules

Moving to standard setting and rulemaking, we continue to focus on modernizing our standards and rules and to assist firms in their implementation of them.

This Board has issued proposals or adopting releases to update 20 standard-setting or rulemaking projects, including four proposals and seven adopting releases this year alone—many of which had not been substantially updated in two decades.

This Board has taken more formal actions to modernize standards and rulemaking this year than any year since 2003 when the PCAOB was established.

The 2025 Budget provides the necessary resources for us to continue this important work and help firms prepare for the implementation of recently updated standards and rules.

As we finalize our standard-setting and rulemaking projects, we are committed to providing firms with resources to help them update their methodologies and train their staff for the upcoming changes. We have proven this commitment in 2024 by issuing multiple new resources for firms related to our new quality control standard, QC 1000.

Although the responsibility for preparing for the upcoming changes falls on firms, we recognize the need for such resources and plan to issue additional materials in 2025.

Enforcement

We also continue to strengthen our enforcement program to ensure accountability, promote deterrence, and protect investors. Our Division of Enforcement and Investigations staff continues to focus on cases with significant audit violations, failures to comply with auditor independence rules, and matters threatening the Board’s oversight activities, such as noncooperation with PCAOB inspections and investigations.

This year, we revoked the registration status of a China-based firm for repeated violations of PCAOB rules and for failing to cooperate with an investigation into those violations.

Separately, we barred two partners of a China-based firm from practicing and imposed practice limitations on another partner of the same firm for violating PCAOB standards. We also concluded major enforcement matters involving exam cheating at audit firms and lying to PCAOB investigators.

All of these violations put investors at risk.

We explore all aspects of a case to determine the appropriate form of relief including where appropriate, revoking firms’ registration status and issuing bars like in the previous examples out of China, requiring functional changes to a firm’s supervisory structure, and requiring firms to retain an independent monitor to drive improvements.

This budget provides us with the resources to continue to hold bad actors accountable on behalf of the investors we serve.

Organizational Effectiveness

Finally, we continue to be good stewards of the fees collected to fund the PCAOB. We do this by evaluating not only our oversight activities, but also our outreach to stakeholders, internal processes, and information technology capabilities.

In 2024, we expanded our outreach to, and support for, smaller audit firms by organizing a nationwide series of in-person and virtual forums for auditors of smaller businesses and broker-dealers, with each event hosted by a different Board Member. The forums provide the PCAOB an opportunity to share valuable resources and information with small firms to help them improve audit quality, while also giving us a chance to hear from them directly about their unique needs and challenges.

We also enhanced our outreach activities with investors. Our Office of the Investor Advocate issued seven Investor Advisories and Bulletins this year. These publications provide critical information to deepen investors’ understanding of the PCAOB’s work.

In addition, we continue to focus on improving our well-functioning internal processes and information technology capabilities, while investing in our highly skilled staff. I am proud to share that our internal surveys show significant increases in staff satisfaction under this Board.

More than 80 percent of PCAOB employees who participated in our most recent employee engagement survey said they would recommend the PCAOB as a great place to work, an increase of nearly 30 percentage points from our first survey.

Before turning back over to you, Chair Gensler, and the Commissioners for any questions you may have, I want to add that I am incredibly honored to lead our talented staff and learn from them every day. When I took over as Chair of this organization just about three years ago, I empowered the staff to challenge existing processes and to work together to develop innovative approaches to achieve our goals.

As demonstrated by their numerous achievements, PCAOB staff have more than risen to the occasion. Investor protection is strong because of their tremendous efforts.

This budget enables us to both provide our staff with competitive compensation that acknowledges their extraordinary work on behalf of investors and retain them, as well as attract new, expert talent to help us meet our investor-protection mission.

I would like to thank the Commissioners and the staff of the Securities and Exchange Commission, including in the Office of the Chief Accountant, Paul Munter, Natasha Guinan, Anita Doutt, Shehzad [Shaz] Niazi, and Taylor Pross as well as in the Office of Financial Management, Caryn Kauffman.

I would also like to thank my fellow PCAOB Board members, and our dedicated PCAOB staff.

I would now be happy to answer any questions you may have.