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 Standards and Emerging Issues Advisory Group (SEIAG).

It is wonderful to see you in person. I want to particularly welcome our new members to your first meeting.

Reconstituting our advisory groups was the first major action the Board took in 2022.

Since then, the SEIAG has made significant contributions toward furthering the PCAOB’s goal of protecting investors, and I look forward to your continued efforts this year. Thank you for your time and commitment to investors.

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 PCAOB staff.

Since our last formal meeting, the talented and dedicated PCAOB staff has been hard at work furthering our strategic goals of modernizing our standards, enhancing our inspections, and strengthening our enforcement.

In 2023, the Board took more formal actions on standard setting and rulemaking than any year in the previous 10. And that work continues in 2024 with three proposals so far this year. You will hear more on our standard setting and rulemaking activities from Barb and our colleagues in OGC in a moment.

I want to particularly thank the SEIAG for your work highlighting the need for more transparent information from audit firms.

Your advocacy is reflected in two proposals we released last month designed to empower investors, audit committees, and others with more consistent, comparable data about audit firms and their audits.

And, of course, next week the Board will consider adopting new standards on quality control and general responsibilities of the auditor. Stakeholder input was essential to both of these projects, and we thank you for all of your feedback.

At the same time, our Inspections team has been hard at work conducting inspections across the globe.

In December, the PCAOB’s staff issued a Spotlight highlighting our inspections priorities for 2024. These priorities include key risks such as high interest rates and other considerations, like audit areas with recurring deficiencies that auditors should be focused on when planning and performing audit procedures.

Of course, we also continue strengthening enforcement, so bad actors know there will be consequences for anyone who puts investors at risk.

Last month we announced the largest civil money penalty in the history of the PCAOB – a $25 million fine against KPMG Netherlands for violations of PCAOB rules and quality control standards relating to exam cheating and misinforming investigators.

This case did not take place in a vacuum.

Since 2021, the PCAOB has sanctioned nine registered firms for exam cheating.

I want to be very clear: The PCAOB will not tolerate exam cheating nor any other unethical behavior, period.

Impaired ethics erode trust and threaten the investor confidence our system relies on. The PCAOB will take action to hold firms accountable when they fail to enforce a culture of honesty and integrity.

So far this year, the PCAOB has imposed $34 million in penalties in 2024, and we’ve only just begun.

We set a record in 2022. We broke that record in 2023. And we’ve already broken it again just four months into 2024.

Let this be a clear warning to those who break the rules – if you put investors at risk, there will be consequences.

I am looking forward to hearing an informative discussion of fraud today.

After all, fraud is what spurred the creation of the PCAOB in the first place.

At the end of 2001, Americans were still grappling with the tragic events of September 11th and their aftermath; our country had entered what would become the longest war in U.S. history; and our economy was just beginning to come out of a recession.

Then the Enron scandal broke.

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 and leaving destruction in the wake of its scandal.

And with each new scandal that broke, there were hardworking Americans, retirees, and families who got hurt. Lifesavings lost. Dreams destroyed.

Which is why Congress took action to create the PCAOB with our mission to protect investors and further the public interest in the preparation of informative, accurate, and independent audit reports.

Because quality audits protect people. And we must never forget that is why we are here.

Thank you to the SEIAG for your work putting together today’s program and to our outside presenters for joining us.

With that, I will turn the meeting back over to Barb to get us started.