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

Remarks as prepared for delivery

Barb [Vanich], thank you for the introduction.

Good morning, everyone, and welcome to our Standards and Emerging Issues Advisory Group (SEIAG) meeting. It is wonderful to be with you in person today.

I join Barb in welcoming Evann [Berry] to today’s meeting. We are so glad to have you on the team.

I also want to especially welcome our newest members. Thank you for volunteering your time and energy on behalf of investors. The work you do as part of the SEIAG is valued and appreciated.  

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.

For years now, you have heard me raise the alarm about a troubling trend in audit quality. In 2021, our inspectors began to see an increase in deficiencies across the audit firms we inspect. That trend continued in 2022 and across smaller firms in 2023.

The PCAOB demanded better on behalf of the investors we serve.

I am able to report that our 2024 inspections found significant improvement 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 exchanges.

This is meaningful progress in our effort to better protect investors in U.S. markets. 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.

As you know well, 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, the temptation to cook the books is always there.

Fortunately, so are we. PCAOB standards set the rules of the road that auditors must follow to ensure financial statements and related disclosures are accurate. PCAOB inspectors are watching to keep them honest. And the threat of PCAOB enforcement deters wrongdoing that puts investors at risk.

So, like many of you, I am deeply troubled by legislation being considered in Congress to eliminate the PCAOB as we know it.

This policy idea is not new. It has been around for decades, since the PCAOB was first created in response to Enron, WorldCom, and the other accounting scandals of the early 2000s that left devastation in their wake.

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. 

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.

Getting an inspections program off the ground alone would take years. It would require hiring hundreds of experienced inspectors and renegotiating agreements around the world, including in China, wasting time and money all while creating significant risk of fraud slipping through the cracks while no one is looking.

Not to mention the disruption to enforcement around the world and potential loss of unmatched expertise built by Barb and her team at a time when firms are relying on their support to implement new standards.

I have said this before, and I will say it again any chance I get: every member of the PCAOB team plays a critical role in executing our mission of protecting investors on U.S. markets. And they are irreplaceable.

As I mentioned, since we last met, our staff have been working hard to provide firms with resources to implement the new standards and rules undertaken by this Board, and I’m glad you will have a chance to hear Barb and her team talk more about those efforts later today.

They have published guidance documents, expert recordings, quizzes, and materials on QC 1000, AS 1000, and other new standards and rules—all of which can be found on our website along with ways for firms to contact us should they have any questions.

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

That is one reason we are also expanding our support for smaller firms by hosting multiple in-person forums across the country for auditors of smaller companies and broker-dealers. In fact, I kicked off this year’s forum series in Chicago earlier this month, and Board Member Botic and I hosted the first two forums so far this year, with more planned for the coming months, all hosted by Board Members.

Just last week, our staff hosted our first in-person QC implementation workshop in DC aimed at assisting smaller firms. The second is scheduled for June 17 in Irving, Texas, and even more are in the works.

And I am proud to announce today that we will be forming a Smaller Firm Resource Group comprised of smaller firm representatives to advise PCAOB staff. This group will help us to stay informed about smaller firms’ experiences with respect to applying PCAOB auditing and related professional practice standards and inspections, and related activities, as well as economic considerations.

This resource group will provide us with another communication channel to receive such feedback, so that we can take it into consideration as we advance our oversight activities, including working to advance audit quality at smaller firms.

Firms interested in participating can email us at outreach@pcaobus.org.

As you know, the PCAOB under this Board continues to make transparency a priority. I began by talking about our latest round of inspection reports. I want to share that we recently published new and enhanced downloadable datasets. These datasets are machine-readable and contain public inspection information from inspection reports going back to 2018 for annually inspected firms and 2019 for triennially inspected firms. We plan to update these datasets on a quarterly basis going forward.

We continue to work to better tell the story behind the inspection reports—what they mean for investors, how firms can improve, and how users can better understand the results. And I am glad you will have a chance to hear more from our staff on their Firm Culture Initiative later today.

But first, I am very much looking forward to joining you in our breakout sessions. So, I will go ahead and turn things back to Barb to get us started.