PCAOB Chair Williams Delivers Remarks at Standards and Emerging Issues Advisory Group Meeting

Remarks as prepared for delivery 

Thank you, [Barbara Vanich]. And thank you to the members of the Standards and Emerging Issues Advisory Group (SEIAG) for joining us today.

I also want to welcome George Botic to his first SEIAG meeting as a Board Member. Many of you know George well from his more than 20 years at the PCAOB, including most recently as the leader of our Division of Registration and Inspections. I know we are all looking forward to working with George in his new role.

Before we begin, I must provide the usual disclaimer that the views 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, the Board had just 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.

Since then, we have 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.

And we voted unanimously to adopt a final confirmation standard and related amendments that had previously been stalled since 2010.

In 2023, the Board has taken more formal actions on standard setting and rulemaking than any year in the last 10 years.

Thanks to the hard work of the dedicated PCAOB staff, we have made incredible progress toward modernizing our standards and rules to better protect investors. And we are just getting started.

Later this year, we expect to vote on a proposal to update the follow-on disciplinary proceedings rule.

And by the end of 2023, it is anticipated the Board will have considered more proposals than any year in PCAOB history, since the first set of standards and rules were proposed 20 years ago.

Headed into 2024, our commitment to advancing our ambitious standards, research, and rules agendas on behalf of investors remains stronger than ever, with multiple projects on our short-term agenda.

As always, your feedback will be critical as we move forward.

In addition to swiftly advancing our short-term agenda, we have also added a project on auditing inventory to our mid-term agenda. We look forward to hearing more on this topic along with another topic on our mid-term agenda – the auditor’s consideration of an entity’s use of a service organization – during today’s meeting.

We are also looking forward to hearing a discussion from the emerging issues subcommittee today on fraud.

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 our Office of Economic and Risk Analysis is doing.

At the same time, we also continue to make progress on enhancing our inspections and strengthening our enforcement.

To date, we have announced $7.8 million in penalties against those who put investors at risk – with two months to go in 2023, that is already higher than the total penalties in each of the five years before our record-breaking year in 2022.

As you know, earlier this year, we began including new information about independence and other matters 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 as noted in our Strategic Plan, 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 that audit committees should consider asking their audit firm that were included in our July Spotlight, 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.

With your help, we will continue to drive audit quality forward.

I want to echo Barb’s thanks to all the members of the SEIAG – not only for being here today, but for all the time and energy you put into this group.

With that, I would like to turn the program back over to Barb.