Chair Williams’ Statement on Firm and Engagement Metrics Proposal

Remarks as prepared for delivery

Trust is essential to our capital markets. And transparency fuels trust.

Consistent, comparable information about audit firms and the issuers they audit bolsters confidence, strengthens oversight, and empowers investors and audit committees to make more informed decisions and help drive audit quality forward.

That is the goal of the two proposals before us today, beginning with Firm and Engagement Metrics.

The Firm and Engagement Metrics proposal sets out a standardized set of 11 metric areas for every firm that audits at least one public company classified as either an “accelerated filer” or a “large accelerated filer” to disclose each year.

The metrics are grounded in countless hours of research by our professional staff. They include information about firms’ overall audit practice, for example, how partners’ quality performance ratings affect their compensation, and information about individual engagements, for example the time incurred by partners and managers on the engagement team related to areas of significant risks, critical accounting policies and practices, and critical accounting estimates.

Collectively, these metrics would help investors make more informed decisions about how they invest their money. And they would provide audit committees with consistent data to analyze and compare as they are selecting and monitoring audit firms.

Firms could use these standardized metrics about themselves and their peers to assist in designing, implementing, monitoring, and remediating their systems of quality control.

The PCAOB could also benefit from having this information provided in a consistent and comparable format to use in our Inspections program and standard-setting initiatives.

Over time, the benefits from the disclosure of these metrics would likely increase as a greater amount of information is accumulated, making trends more apparent and enabling the benchmarking of information across engagement teams and firms.

Today’s proposal is informed by more than a decade of careful study and collection of input from stakeholders.

In 2015, the PCAOB Board issued a concept release to obtain public comment on the disclosure of a proposed set of metrics related to an issuer’s engagement team and the engagement team’s respective audit firm. This concept release was partially spurred by a recommendation from a 2008 report issued by the U.S. Department of the Treasury's Advisory Committee on the Auditing Profession. That report included suggested actions directed at the PCAOB and other organizations that would enhance the sustainability of a strong and vibrant public company auditing profession.

In the last 10 years, other jurisdictions have implemented mandatory or voluntary initiatives related to the monitoring and disclosure of metrics.

At the same time, most of the largest firms have voluntarily published transparency reports including metrics of their own. But the lack of consistent standards across firms makes it difficult for stakeholders to use these metrics in a meaningful way.

Over the years, our expert staff has continued to accumulate knowledge and experience with firm disclosures and metrics.

And the PCAOB has heard from various stakeholders on the need for a consistent set of metrics at both the engagement and firm levels. Over the last two years alone, both our Standards and Emerging Issues Advisory Group and our Investor Advisory Group have held separate discussions where they emphasized their continued interest in firm and engagement metrics.

As Barb mentioned, these metrics are not guaranteed predictors of audit quality. They do provide an important window into how a firm manages its resources and conducts its audits that, with context, will empower audit committees, boards of directors and others to hold firms accountable. And accountability begets quality.

As always, I am interested in reading the comments received on this proposal, including those comments on the set of metrics we identified and the proposed calculations so that the metrics are consistently disclosed by all firms that would be required to comply.

I would like to thank the many staff at the PCAOB for their work on this project. Specifically, I would like to thank in the Office of the Chief Auditor, Barb Vanich, Jessica Watts, Stephanie Hunter, Karen Wiedemann, Clair Sever, Schuyler Simms, and Akiko Upchurch; in the Office of Economic and Risk Analysis, Martin Schmalz, Nick Galunic, and Jonathan Fluharty-Jaidee; and in the Office of General Counsel, Connor Raso, Katherine Kelly, Vince Meehan, and Marc Francis.

In addition, I would like to express my gratitude to my fellow Board Members and their staff for their contributions to this project. I would also like to recognize the support provided by staff from the Division of Registration and Inspections, the Division of Enforcement and Investigations, and the Office of Communications and Engagement.

Finally, I would like to thank the Securities and Exchange Commission’s staff, including the staff of the SEC’s Office of the Chief Accountant, for their support and assistance.