PCAOB Chair Williams Delivers Remarks at Baruch College’s 23rd Annual Financial Reporting Conference: “More than 20 years after Enron, investors are better protected today because of the PCAOB.”

Remarks as prepared for delivery

Thank you, Marc [Siegel], for the introduction, and congratulations on your appointment as chair of this conference. I look forward to our conversation in a few moments. 

For more than 20 years, this conference has provided an important opportunity for those who care about financial reporting to reflect on its future in our markets—and much of that success is, of course, due to Professor Norman Strauss. Congratulations on your well-deserved retirement, Professor. 

I am honored to join you all again this year to also reflect on the challenges and opportunities before us.

I first want to thank Rocky Srdanovic and Matt LaPere for all you do to make this conference such a success.

Before I begin, I must provide the usual disclaimer that the views I express today, in my official capacity as PCAOB Chair, are my own and do not necessarily reflect the views of my fellow Board Members or PCAOB staff.

For the past few years, I have joined you with a warning about a troubling trend in audit quality. 

In 2021, our inspectors began to see an increase in deficiencies known as Part I.A deficiencies across the audit firms we inspect. These are deficiencies of such significance that PCAOB staff believe the audit firm failed to obtain sufficient appropriate audit evidence to support its opinion on the public company’s financial statements or internal control over financial reporting. That trend continued in 2022 and across smaller firms in 2023.  

The PCAOB demanded better on behalf of the investors we serve. We focused our resources to support firms’ efforts to improve. We actively engaged investors and audit committees. And today, I am able to report that our 2024 inspections found significant improvement on average across firms.

This includes an expected seven point drop in the aggregate Part I.A deficiency rate across firms inspected, and a six point drop among the four largest firms – which, at the end of last year, collectively audited approximately 80% of the market capitalization of public companies listed on U.S. exchanges.

This is meaningful progress in our effort to better protect investors in U.S. markets and strong evidence that our approach is working.

Still, while deficiency rates have dropped significantly, they remain too high. 

Our work is far from over. And today, that work is as important as ever. 

History tells us that when the economy is tight, the risk of fraud goes up.

At the end of 2001, our economy was just beginning to come out of a recession when the Enron scandal broke.

Investors lost billions of dollars in savings, thousands of workers lost their jobs and their retirement, and trust in our markets eroded.

Enron’s collapse was followed by the failure of its auditor, Arthur Andersen, one of the largest audit firms in the world at the time.

And Enron wasn’t alone.

In 2001, Enron’s bankruptcy was the largest in U.S. history. Just a few months later, it was dwarfed by the bankruptcy of WorldCom – yet another corporation caught cooking the books.

It was these scandals, and the destruction left in their wake that prompted Congress to create the PCAOB with overwhelming bipartisan support. 

In the more than 20 years since, the Board has faithfully and successfully executed its mission to protect investors and further the public interest in the preparation of informative, accurate, and independent audit reports.

Today, the stakes are higher than ever. 

At its peak in August 2000, Enron had a market capitalization of about $70 billion, ranking it as the seventh largest publicly-traded company in the United States, and had over 20,000 employees. Since then, the value of the stock market, including the values of the largest and most widely-held companies in America, has increased substantially. 

As of March 31, 2025, the 10 largest companies alone had a combined market cap of $17.4 trillion and employed millions of people, a scale that makes Enron look small by comparison. 

With millions of Americans invested in the stock market – including through 401(k)s and pensions they’ve worked their entire lives to build – auditors must perform their audits with more care than ever.

So, I am deeply troubled by legislation passed by the House Financial Services Committee that proposes to eliminate the PCAOB as we know it.

The integrity of our markets is not inevitable. It takes vigilance to guard against negligence, recklessness, and fraud that threaten our system and the people who depend on it.

The PCAOB plays a vital role in that effort – a role our talented and dedicated staff have developed over decades, building unique experience and expertise that cannot be simply cut and pasted elsewhere without significant risk to investors at a time when markets are already volatile, and investors have so much to lose.

Reflecting on the scandals that led Congress to create the PCAOB, Senator Paul Sarbanes, who coauthored that law, warned of complacency. “When things get better,” he said, “companies tend to forget what happened or how serious it was at the time. Trying to maintain high standards is a difficult job.”

Over the last 20 years, the PCAOB has proven itself up to the task.

Under the current Board, we have worked to build on the PCAOB’s strong legacy of protecting investors, setting four strategic goals to further advance the PCAOB’s mission.

1. First, modernize our standards,
2. Second, enhance our inspections,
3. Third, strengthen our enforcement, and
4. Fourth, improve our organizational effectiveness.

Modernizing Standards

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, far too many had not been significantly updated in at least 20 years. 

So, we set an ambitious agenda to do just that.

Thanks to the incredible work of the expert PCAOB staff, this Board has taken more formal actions on standard-setting and rulemaking than any time since the PCAOB was created—actions that investors deserve as they make decisions about their investments in the market.

We have finalized seven rulemaking and standard-setting projects, covering 24 rules and standards.

They cover quality control (QC), confirmations, the use of other auditors, the use of technology, constructive withdrawal of registered firms, contributory liability, and a suite of standards that address core auditing principles and responsibilities, including reasonable assurance, professional judgment, due professional care, and professional skepticism—known as AS 1000.

Public comment has been essential to that process, and I thank all stakeholders who shared their input.

The new quality control standard alone represents a watershed moment that will drive audit quality well into the future, because QC systems lay the very foundation for everything auditors do. 

When QC systems operate ineffectively, investors are put at risk. But, when QC systems operate effectively, quality audits performed in accordance with applicable professional and legal requirements are likely to follow – leaving investors better protected.

As anyone who has hung wallpaper knows, when you get the first corner right, everything else falls into place. But if that first corner is off, things just tend to get worse as you go. This new standard sets firms up to get that first corner right for decades to come. 

We are investing considerable time and attention toward helping firms implement all of our newly adopted standard-setting and rulemaking projects.

We created an implementation page on our website with everything from staff guidance and videos to interactive knowledge checks.

Of course, our staff are also available should auditors have any questions. We have a hotline specifically dedicated for auditors to call our staff if they have standards-related questions. We are also hosting in-person workshops specifically targeted at providing support to smaller firms who face unique challenges without the resources and support that often come from a national office.

The dedicated staff who do this work for the PCAOB are unmatched in their expertise. They have an average of nearly 10 years of standard-setting and rulemaking experience at the PCAOB, on top of a decade or more working in public accounting before joining the PCAOB. I am grateful for their work, and I encourage firms to take advantage of the wealth of knowledge they have to offer.

I am proud of the progress we’ve made under this Board. Still, there is so much more left to do.

More than 30 “interim” standards remain largely untouched from when they were originally written by the profession in the 1980’s and 90’s.

As technology evolves rapidly, ensuring our standards are fit for purpose in today’s world is essential.

Our capital markets don’t stand still. They evolve constantly. Practices change. And new risks emerge. 

To keep investors protected, our standards must keep up – and our work must continue.

Inspections

At the same time, our Inspections Division has been hard at work advancing goal number two.

Last year alone, our inspectors spent over 750,000 hours inspecting 231 audit firms, including reviewing portions of over 900 individual audits, and conducting our quality control remediation process.

They regularly conduct inspections in more than 50 jurisdictions around the world, including in China where we secured historic access for the first time ever beginning in 2022.

The hundreds of PCAOB staff who do this work have unparalleled experience and expertise.

PCAOB inspections staff average 22 years of experience, including a decade in public accounting before ever joining the PCAOB.

They have experience in more than 30 different industries, from banking to energy, and expertise across 40 different subject matters, from revenue recognition to derivatives and technology. They speak 33 different languages. And they work around the clock and around the globe to protect investors in U.S. markets.

Under this Board, we have worked to boost transparency and share more information about our inspections more quickly.

The inspection results I detailed earlier showing significant improvements in deficiency rates were released five months sooner this year than the year before and 11 months sooner than the year before that.  

This matters because when investors, audit committees and other stakeholders have access to timely, relevant information, they can use it to hold firms accountable for delivering high quality audits. And firms can use that same information to drive their own improvements.

Under this Board, we have added new information to our reports and are regularly adding new tools to our website to help users better understand and compare inspection results both across firms and over time.

We have also more than doubled the number of staff reports we call Spotlights, which provide valuable information, including ways firms can improve by remaining aware of key risks and following examples of good practices.

And, once again, because we understand that smaller firms face unique needs and challenges, we recently launched a new series called “Audit Focus,” aimed at providing useful information tailored for them.

Enforcement

Similar to our standard-setting and inspections staff, our enforcement professionals bring invaluable knowledge and experience to the work of conducting complex audit-related investigations. On average, our enforcement staff have over eight years of professional experience at the PCAOB, and most have a minimum of seven years of experience addressing complex legal and accounting or auditing issues before coming to the PCAOB.

Removing bad actors from the profession and punishing wrongdoing protects investors, promotes deterrence, and bolsters trust in the vast majority of honest auditors who are working hard to live up to the trust investors have placed in them.

As President George W. Bush said when he signed the law that created the PCAOB, “For the sake of our free economy, those who break the law — break the rules of fairness, those who are dishonest, however wealthy or successful they may be, must pay a price.” 

The cases we investigate and ultimately decide to enforce involve complex and serious matters, including audit failures in cases involving financial statement fraud, taking on client work that firms can’t complete, altering work papers, and not performing sufficient work before signing audit opinions.

We have delivered historic sanctions holding China-based firms accountable for violations, including falsifying audit reports, failing to maintain independence, improperly adopting the work of another accounting firm as their own, and sharing answers to tests on mandatory internal training courses.

And we have shown that the PCAOB does not and will not tolerate unethical behavior—or any other behaviors that erode trust and threaten the investor confidence our system relies on.

This Board has not only issued record-breaking monetary penalties, we’ve revoked firms’ registrations, barred individuals, required functional changes to a firm’s supervisory structure, and required firms to retain outside consultants to drive improvements and best protect investors.

We are using every tool in our toolbox to best protect investors and send a clear message to drive deterrence: If you put investors at risk, you will be held accountable. 

Improving Organizational Effectiveness

That brings me to our final goal: improving organizational effectiveness.

One of the first major actions this Board took was to reconstitute our advisory groups, the Investor Advisory Group (IAG) and Standards and Emerging Issues Advisory Group (SEIAG). We are incredibly grateful for the time the members of these advisory groups commit to providing us with valuable insights that helps inform our work.

Under this Board, we also expanded our stakeholder engagement by creating the Office of the Investor Advocate (OIAD) and adding a Deputy Director responsible for external engagement to enhance the PCAOB’s engagement with all stakeholders. We enhanced our outreach activities with investors by issuing Investor Advisories and Bulletins, which provide critical information to deepen investors’ understanding of the PCAOB’s work. In the last year alone, we issued nine of these publications, which can be found on our website.

We have engaged in a robust outreach campaign to audit committees, which includes conversations with more than 200 audit committee chairs each year.

Our Office of Economic and Risk Analysis (OERA) has expanded our engagement with the academic community to help inform the critical work their talented professionals do. And our Office of International Affairs (OIA) has continued to maintain the PCAOB’s status as a global leader in audit oversight.

I recently returned from a meeting of the International Forum of Independent Audit Regulators (IFIAR), where I had the chance to see firsthand just how well-regarded our expert staff are among their counterparts around the world, many of whom often look to them as the model for how to do this work well.   

And we have awarded a record number of scholarships to accounting students – including students right here at Baruch – to help ensure we have the qualified professionals needed to drive audit quality well into the future. 

Of course, none of this work is possible without the incredible staff at the PCAOB. They are some of the most talented and qualified professionals I have had the honor of working with. I have mentioned some of them today already. But there are many more who are essential to the work we do protecting investors. Simply put, the collective expertise and experience of all PCAOB staff is irreplaceable.

Of course, part of how we continue to attract and retain the best, most qualified people for the job is by creating a culture where people want to work. I am proud that by empowering our people to bring their best to this organization and on behalf of investors, we have increased the number of staff who say the PCAOB is a great place to work by 30 percentage points since I started. It is essential to our mission that the PCAOB continues to be a place where the most qualified, dedicated people want to be.

Conclusion  

More than 20 years after Enron, investors are better protected today because of the PCAOB. And with more at stake than ever, we are hard at work every day meeting our mission for the people we serve.

From workers saving for retirement, to families investing for their futures, to businesses creating jobs because they can raise money through sound, liquid markets – quality audits protect people. And protecting people drives everything we do. 

Thank you, I look forward to taking your questions.