Fall 2025 SEIAG Advisory Group Meeting – Leading with Clarity: Promoting Responsible Innovation in Public Company Auditing

Remarks as prepared for delivery

Good morning. The views I express today are my own and do not necessarily reflect the views of the PCAOB, other Board Members, or PCAOB staff.

I want to thank SEIAG members for your continued engagement and expertise. Today I will focus my remarks on innovation through the responsible use of AI in public company auditing. The question is not whether AI will transform auditing—it already is. The real question is whether the PCAOB will lead that transformation or continue to lag behind it.

For example, audit firms are deploying AI tools to assess complete populations of journal entries and analyze data at unprecedented scale. These innovations promise significant improvements in audit quality. But regulatory ambiguity threatens to stifle and impede this progress. If our standards create uncertainty about AI-driven procedures, firms may retreat to less effective manual methods simply because they're more familiar from a compliance standpoint. That would certainly be a regulatory failure.

The Technology Innovation Alliance Working Group's Future State Deliverable¹ provides a roadmap with four pillars: promoting structured data, providing AI guidance, building innovation capacity, and encouraging technology literacy. But recommendations only matter if we act on them timely.

I want to highlight three essential areas for PCAOB action:

First, provide regulatory clarity. Audit firms need clear, principles-based guidance on responsible AI use, including frameworks for model validation, documentation, and quality control. Clarity incentivizes innovation; ambiguity creates compliance risk that discourages it.

Second, explore agile standard-setting for technology-driven standards. Technology innovation moves faster than our traditional process. We need iterative approaches with stakeholder testing and input before formal adoption. An Innovation Lab could facilitate experimentation and develop standards that promote rather than impede audit quality.

Third, align our inspection methodology with innovation objectives that are directly linked to audit quality. Our inspectors need training and clear criteria to evaluate AI-driven procedures fairly, recognizing when technology enhances audit quality rather than treating it as “check-the-box” compliance risk.

The alternative is stale regulation—where our standards become anchors rather than engines for audit quality². We cannot afford this when investors depend on high-quality audits that increasingly depend on responsible technology adoption.

Responsible AI use requires thoughtful governance around accuracy, bias, documentation, and explainability. But addressing these concerns doesn't require regulatory barriers that prevent beneficial innovation. Proportionate, risk-based regulation can protect audit quality while enabling technological progress.

These same principles—stakeholder engagement, agile standard-setting, and innovation-focused regulation—apply to other emerging areas, including crypto. As more public companies hold digital assets and consider engaging in various types of crypto activities, we face similar questions about audit procedures and regulatory clarity. Whether discussing AI or crypto, the principle is the same: the PCAOB must provide clarity to ensure audit quality keeps pace with financial innovation.

We're not operating in a vacuum. The SEC's Crypto Task Force, led by Commissioner Peirce, has held extensive roundtables demonstrating transparent stakeholder engagement³. The CFTC launched its "crypto sprint"⁴ with joint SEC harmonization initiatives⁵. FASB issued comprehensive crypto accounting standards providing needed clarity⁶. These entities recognized that regulatory ambiguity stifles innovation and enforcement-first approaches drive activity offshore. They responded with clarity and collaboration. When major regulators actively promote innovation through clear guidance, the PCAOB cannot afford to be the outlier that inadvertently discourages beneficial technological advancement in auditing.

The audit profession is rising to meet the AI challenge. We must rise with them while maintaining rigorous investor protection standards. I look forward to your perspectives on promoting responsible innovation in public company auditing.

Thank you.