PCAOB Chair Williams Delivers Remarks at the Accountants’ Liability Conference

Remarks as prepared for delivery

Thank you, Veronica (Callahan), for the kind introduction. It is a pleasure to be with you all today to discuss the important work of the PCAOB to protect investors.

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

It is an honor to share the stage with so many distinguished speakers, including our incredible leaders in the PCAOB’s Division of Registration and Inspections and the Division of Enforcement and Investigations who you heard from yesterday.

The day he signed the law that created the PCAOB, President George W. Bush remarked, “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.”

About six months prior, our economy was just beginning to come out of a recession when the Enron scandal broke—only to be dwarfed by WorldCom a few months later. Investors lost billions of dollars in savings, thousands of workers lost their jobs and their retirement, and trust in our markets eroded.

Congress created the PCAOB to help restore that trust and protect investors by ensuring the preparation of informative, accurate, and independent audit reports.

In doing so, they recognized that strong enforcement would be essential to the PCAOB’s mission.

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.

The cases we investigate, and ultimately decide to enforce, involve complex and serious matters. Specifically, we have prioritized:

• Investigations that involve significant audit violations, especially those that reflect a lack of due care and professional skepticism;

• Significant independence violations;

• Matters that involve unethical conduct, including conduct that threatens the integrity of our oversight, such as improperly altering workpapers in advance of our inspections; and

• Matters relating to deficiencies in quality control policies and procedures.

About 75 percent of the disciplinary orders issued during my time as Chair fall into one or more of these priority categories.

And 98 percent of the civil money penalties imposed on auditors have been imposed in those priority cases.

This Board has not only issued record-breaking monetary penalties, but we have also revoked firms’ registrations, barred individuals, required functional changes to a firm’s supervisory structure, and required firms to retain independent 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.

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.

In the last four years, the Board has sanctioned 10 firms for quality control violations involving cheating on continuing professional education exams.

Investors must be able to trust that audit professionals are acting with integrity, and few things impair trust like impaired ethics.

In each of the Board’s disciplinary orders in these matters, the exam sharing misconduct was extensive and occurred over multiple years.

The most significant example, KPMG Netherlands, resulted in the PCAOB’s highest monetary penalty in history.

In that case, the firm’s misconduct went far beyond the underlying answer sharing.

During the PCAOB’s investigation of the matter, the Firm submitted false representations to PCAOB investigators claiming no knowledge of answer sharing—even though certain individuals responsible for those representations had engaged in answer sharing themselves.

One of those individuals was KPMG Netherlands’ former head of audit, who, as a result of his misconduct, was permanently barred from associating with a PCAOB registered firm.

The PCAOB worked closely with our Dutch counterparts in bringing this case. And this is just one example of how the PCAOB’s global reach is working to improve audit quality around the world.

Since its inception, the PCAOB has taken enforcement action against auditors and firms in 25 countries on six continents.

In fact, since last year, nearly half of the Board’s disciplinary orders sanctioned auditors from outside the US.

This includes China, where the PCAOB has 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.

In a global economy, the work of protecting investors does not stop at our borders.

Over the past two decades, the PCAOB has secured dozens of bilateral cooperative agreements with other financial regulators across the globe, including in China, that facilitate our access not only to inspect firms outside the U.S. but also to investigate, and take testimony – leaving the PCAOB uniquely positioned to conduct enforcement of audit firms around the world like no other U.S. regulator can.

This is just one of the many reasons why I am deeply troubled by legislation being considered in Congress to eliminate the PCAOB as we know it and attempt to fold its responsibilities into the SEC.

The SEC was my professional home for 11 years. I have deep admiration and respect for the incredible professional staff there. They are excellent at what they do.

It is different from what we do here at the PCAOB.

The unique experience and expertise built up by the PCAOB over decades cannot simply be cut and pasted without significant risk to investors at a time when markets are already volatile.

This policy idea is not new. It has been around since the PCAOB was first created.

In the more than 20 years since, the PCAOB, led by its expert staff, has made invaluable contributions to the safety and security of U.S. capital markets.

Investors are better protected because of the PCAOB.

Audit quality has improved because of the PCAOB.

Of course, enforcement is just one part of this story, alongside standards and inspections.

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. Over the years, many updates have been considered. It’s past time to bring them to fruition.

As technology evolves rapidly, ensuring our standards are fit for purpose in today’s world is essential. So, under this Board, we have been working 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.

And the majority earned unanimous support from the entire Board.

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.

We want firms to be successful in properly implementing these new standards, because that means investors are better protected.

And we are here to help. I encourage all firms to take advantage of the resources and support we offer.

Inspections

Similar to enforcement, the PCAOB conducts regular inspections around the world.

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, 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. Companies have targets to hit, and when they can’t make their numbers honestly, cooking the books is tempting.

We can look right back where we started to Enron and Worldcom as examples.

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.

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, led by our uniquely qualified expert staff, the PCAOB has proven itself up to the task.

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.

We must never forget those people are why we are here. 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.

At the PCAOB, protecting people drives everything we do.

Thank you. Now, I’d like to turn things back over to Veronica. I look forward to taking your questions.