PCAOB Chair Williams Delivers Remarks at Investor Advisory Group Meeting

Remarks as prepared for delivery 

Thank you, [Saba Qamar] and [Amy Copeland McGarrity]. And thank you to the Investor Advisory Group for meeting with us today. I am looking forward to hearing from you.

Before we begin, I must provide the usual disclaimer that the views that I express today are my own and do not necessarily reflect the views of my fellow Board Members or the talented and dedicated PCAOB staff.

When we met in June, I asked for your help encouraging investors and audit committees to make use of PCAOB inspection data to hold firms accountable for delivering high-quality audits.

As you know, earlier this year, we began including new information about independence and more in our inspection reports for the first time. In July we expanded the tools available on our website to make it easier to find and compare deficiency rates across audit firms.

Transparency is one of the most powerful tools the PCAOB has to drive improvements in audit quality – and we remain committed to increasing that transparency.

Ultimately, the responsibility falls on auditors to correct the problems that led to deficiencies in their audits.

The PCAOB will continue demanding firms do better. We have demonstrated that we will not hesitate to bring enforcement cases against auditors where appropriate. And we will continue to carry out hundreds of inspections each year.

At the same time, accountability from audit committees and investors provides a powerful incentive to find solutions.

And this is where your influence can make a big impact.

Please use your networks to encourage investors and audit committees to review our inspection reports and make use of their findings. Encourage them to take note of which firms are consistently complying with PCAOB standards – and which firms are not. Encourage them to apply that knowledge in assessing the auditors of companies where they invest or serve on the board.

Share the questions included in our report that audit committees should ask their audit firm, including:

• Has our audit engagement been inspected by the PCAOB? Were there any audit areas that required significant discussions with the PCAOB that did not result in a comment form?
• Has the engagement partner been inspected on other engagements? If so, what were the results of that inspection?
• And, what is the audit firm doing to address overall increased inspection findings?

Spread the word that investors can use their influence to engage with investor relations and the audit committees of the companies in which they invest and encourage them to seek out firms with proven track records on quality.

Your input is incredibly valuable as we continue working to empower investors and audit committees by improving the information we share and the tools we provide to help analyze that information. Thank you for your insights.

I know Saba is also working with many of you and Todd Cranford, our Stakeholder Liaison, to find ways the PCAOB can help encourage more dialogue between investors and audit committees. Please continue to share your ideas with her.

As I mentioned, we will not hesitate to bring enforcement cases against auditors where appropriate. I’m excited you will hear directly from our enforcement team today about the work they are doing to make sanctions count, expand how we identify cases, and expand the types of cases we are pursuing.

At the same time, [Barbara Vanich] and her team are hard at work as always, and you will hear more from her on our standard-setting agenda in a moment.

Since we met in June, the Board proposed amendments to give auditors additional direction addressing specific aspects of designing and performing audit procedures that involve technology-assisted analysis of information in electronic form.

And we issued a proposal on a rulemaking project that would hold associated persons accountable when they negligently contribute to firm violations that can put investors at risk.

Thank you for the valuable insights you shared in your comment letter on the proposed technology-assisted analysis amendments. I look forward to reading your perspectives on the amendments we are proposing addressing contributory liability.

Late last month, the Board unanimously voted to adopt a new standard and related amendments on the confirmation process, which touches nearly every audit.

The new standard will help auditors detect fraud and better protect investors now and into the future. Thank you for your comments.

Still, we have much work ahead of us, including Firm and Engagement Performance Metrics, which is on our short-term agenda.

We believe certain performance metrics about accounting firms and their audit engagements may provide valuable context and perspective for investors, auditors, audit committees, and others. For example, such metrics may provide useful information to investors as they make investment and proxy voting decisions.

I am interested in hearing your presentation today and the thoughts you have in this area as we work toward issuing a proposal. Your work will continue to inform us.

As we continue pushing forward the most ambitious standard-setting and rulemaking agenda in PCAOB history, we are thrilled that Dr. Martin Schmalz joined the PCAOB in August to help inform that work as Chief Economist and the Director of the Office of Economic and Risk Analysis.

Martin is a tenured Professor of Finance and Economics at the University of Oxford, Saïd Business School, serving as the Academic Area Head for the Finance, Accounting, Managerial Science, and Economics faculty group.

He brings extraordinary expertise to the great work Michael Gurbutt and the team in our Office of Economic and Risk Analysis are doing.

Of course, our economic analysis and our work don’t end once a standard is adopted. We continue to examine the impact of the standard through our post-implementation review process.

That process is currently ongoing for critical audit matters. And I look forward to hearing your recommendations today as a follow-up to the CAM presentation at our last meeting in June.

Finally, I want to acknowledge Board Member DesParte, whose second term at the PCAOB is coming to an end later this month. This will be his last Investor Advisory Group meeting. Reconstituting the IAG was one of the first actions we took together as a Board.

Duane, thank you for your service to the PCAOB. We wish you well in your next chapter and look forward to continuing to work with you over the coming weeks.

I also applaud the SEC’s appointment of George Botic to the Board. Many of you know George well, and I know we are all looking forward to working with him in his new role.

George will be leaving the Division of Registration and Inspections in the incredibly capable hands of Christine Gunia. Christine has been with the PCAOB since 2004, nearly as long as George.

Since 2018, she has served as the Deputy Director of DRI’s Global Network Firm Inspection Program, where she is responsible for overseeing the inspections of the six largest domestic accounting firms as well as their non-U.S. affiliated firms. I look forward to working with Christine as she takes on the role of Acting Director of DRI.

With that, I will turn the meeting back over to Saba. Thank you again for joining us today. I am looking forward to your presentations.