Chair Williams’ Statement Before the SEC Open Commission Meeting on the PCAOB’s Proposed 2024 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 2024 budget.

The statement Chair Williams delivered before the commission is below as prepared.

Remarks are Prepared for Delivery

Thank you, Paul and Caryn, and good afternoon, Chair Gensler and Commissioners Peirce, Crenshaw, Uyeda, and Lizárraga. It is great to be with you today, and I thank you for the opportunity to present our 2024 Budget for your consideration.

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

The 2024 Budget is $384.7 million and funds 946 positions. It results in a projected Accounting Support Fee (ASF) of $358.8 million, comprised of $331 million for issuers and $27.8 million for broker-dealers. While the 2024 budget does increase the ASF overall, there is minimal impact on individual entities billed. Based on experience, we anticipate the smallest billable entities will see no increase, while the median difference per bill will likely be only $200.

The PCAOB’s 2024 Budget reflects the resources required for the PCAOB to carry out its statutorily mandated responsibilities and protect investors in U.S. markets by advancing the goals and objectives as set forth in our 2022-2026 Strategic Plan. The Strategic Plan is built around four key goals, each of which is essential to meeting our investor protection mission: First, modernizing our standards; Second, enhancing inspections; Third, strengthening our enforcement; and Fourth, improving organizational effectiveness.

As you know, when the PCAOB was first getting off the ground in 2003, it adopted existing standards that had been set by the auditing profession on what was intended to be an interim basis.

Unfortunately, many of those standards have not been significantly updated since. The world has changed over the last two decades. To keep investors protected, we must keep up.

We have been working hard to do just that. All but two of the standards covered under the PCAOB’s current standard-setting agenda are among those ‘interim standards,’ which have not been significantly updated in 20 years. The other two, which are part of the Data & Tech proposal the Board issued unanimously, have not been significantly updated in more than ten years.

In advancing this agenda to modernize our standards, the Board has taken more formal actions on standard setting and rulemaking this year than any year in the last ten. In 2023, we have issued four proposals. We also adopted a final Confirmations standard and related amendments on a project that, before we issued a proposal last year, did not have any activity since 2010.

This budget provides the funding to continue the necessary work of modernizing PCAOB rules and standards in 2024. As noted with our agendas, our projects are guided by our mandate of investor protection. Public comment is an essential part of this process. In 2024, we will continue our thoughtful approach — taking into account the feedback from all our stakeholders, and remaining laser focused on our mission to protect investors.

At the same time, the PCAOB made great headway enhancing our inspection efforts this year. For example, we provided greater transparency to our inspection reports by including a section on auditor independence along with a range of other improvements. We also provided additional tools on our website to facilitate comparison of inspection report data, such as analyzing deficiency rates across audit firms. The 2024 Budget includes the resources necessary to continue to drive inspection activities in support of our mission to protect investors, including inspecting the remaining firms registered in mainland China and Hong Kong under our mandate.

We also continue to strengthen our enforcement program in order to ensure accountability, promote deterrence, and protect investors. Last year, we imposed the highest penalties in PCAOB history against those who put investors at risk. This year, we have nearly doubled that record – with more than $20 million in penalties, including historic sanctions against China-based firms.

The 2024 Budget provides the necessary resources to continue conducting effective investigations and bringing strong enforcement actions in service of investors.

Finally, I believe it is essential that we operate as good stewards of the fees collected to fund the PCAOB. This means making sure our organization operates as effectively as possible, which brings us to goal number four.

We are investing in well-functioning internal processes and enhancing our information technology capabilities, including improving our use of data analysis to make well-informed decisions as we execute our mission.

At the same time, none of the work we do to protect investors is possible without our talented and dedicated staff. Congress recognized this fact in Sarbanes-Oxley, which requires the PCAOB fix staff compensation at a level comparable to the private sector.

As such, we believe it is appropriate that approximately three quarters of this budget relates to compensation, which is consistent with past budgets. The 2024 Budget provides our staff with the competitive compensation that is indicative of their hard work while enabling us to retain and attract the top talent necessary to carry out our investor protection mission.

The budget reflects an additional net of 20 positions, which is both modest and essential to advance our oversight activities, either directly or through their support function. Half of these new positions will reside in our Division of Registration and Inspections and will restore the total number of staff in this division back to an amount comparable to our 2016 and 2017 budgets, before the number of inspectors was reduced to a level below what our experts tell us is necessary to effectively protect investors today.

We are currently seeing an increase in deficiency rates for the second year in a row. Being responsible stewards of the fees collected to fund our work requires us to meet this moment and make the investments necessary to protect investors.

We cannot justify simply maintaining the status quo. We owe it to investors to provide our staff with the tools they need to successfully drive audit quality forward.

Our agenda is ambitious, and it is also narrowly focused on our core mandate: to protect investors in U.S. markets and further the public interest in the preparation of informative, accurate, and independent audit reports. We are not charting new territory. We are committed to using the authority we have in service of investors.

Before turning back to you, Chair Gensler, I would like to thank the Commissioners and the staff of the Securities and Exchange Commission who have provided insight and direction to our efforts, including in the Office of the Chief Accountant, Paul Munter, Natasha Guinan, Anita Doutt, Shehzad 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 be happy to answer any questions you may have.