Careers
SubscribePCAOB Chair Williams Statement on Firm Reporting Adoption
Remarks as prepared for delivery
Our next agenda item today is a set of amendments to the PCAOB’s Firm Reporting requirements. With these amendments, the PCAOB is taking action to have the necessary information to execute our regulatory process with more consistent, complete, and comparable information from audit firms, and to provide greater transparency to investors and audit committee members.
The PCAOB’s annual and special reporting requirements for collecting and publishing information from firms have not been substantively updated since 2008. And as with the Firm and Engagement Metrics project, several of the overarching themes and concepts in the Firm Reporting amendments were originally outlined in the U.S. Department of the Treasury Advisory Committee on the Auditing Profession Report in 2008 under President Bush.
To put it another way, the PCAOB is carrying forward recommendations that have been talked about for 16 years.
These amendments were proposed by the Board in April of this year. Our expert staff has now studied the comments that we received from the public and recommended that we adopt the amendments.
And that is why we are here today.
These amendments reflect lessons learned through years of work by the expert PCAOB staff, and if adopted, would amend the annual and special reporting requirements and facilitate the disclosure of more complete, standardized, and timely information by firms, such as enhanced fee, governance, and network information.
More specifically, today’s amendments enhance firms’ required current reporting of information on the PCAOB’s public Annual Report Form known as Form 2 and the Special Reporting Form also known as Form 3.
The changes under the final rules cover six key areas:
First, financial information. If adopted, the amendments will require all registered firms to publicly report additional fee information, so that reported fee information will be more useful to users of the Annual Report form. The largest firms will also be required to confidentially submit financial statements to the PCAOB. These firms play an essential role in our capital markets and overall economy. The PCAOB already collects certain information once an audit firm is in bankruptcy or receivership. However, by that point, especially for the largest firms, there would be significant disruption in the auditing market – giving the PCAOB little time to consider the ramifications of other firms being able to comply with PCAOB standards as they engage with new audit clients.
Second, leadership and governance information. Under the final rules, all registered firms will be required to report additional information regarding their leadership, legal structure, ownership, and other governance information, including reporting on certain key quality control operational and oversight roles. Firms’ leadership and governance structures have a direct impact on their incentives and ability to provide high-quality audit services to investors.
Third, network relationships. These amendments require registered firms to report a more detailed description of any network arrangement, including describing the network’s structure, the registered entity’s access to resources such as audit methodologies and training, and whether the firm shares information with the network regarding its audits.
This information provides a look at the accountability and oversight structure that a firm is subject to via its membership in a network.
Fourth, special reporting. Under the final rules, annually inspected firms, of which there are typically 15 or fewer, will be required to file special reports for additional events material to a firm’s organization, operations, liquidity or financial resources. These are the types of events that may directly bear on a firm’s ability to conduct audits.
Fifth, these amendments require additional reporting related to cybersecurity. There is general consensus that cybersecurity threats are among the greatest risks in the business world today. As such, these amendments require registered firms to confidentially and promptly report significant cybersecurity events to the PCAOB—and periodically and publicly report a brief description of any policies and procedures to identify and manage cybersecurity risks.
The last change under these rules requires firms that registered with the Board prior to the implementation date of the PCAOB’s new quality control (QC) standard, which is December 15, 2025, to submit an updated statement of the firm’s quality control policies and procedures pursuant to the new QC standard. This is a one-time reporting obligation to help ensure information regarding a firm’s QC system is current.
Together, these changes will arm investors and audit committee members with even more information to make informed decisions about audit firms and will enable the PCAOB to better execute its investor protection mission.
The PCAOB takes public comment and feedback very seriously. We read each and every comment letter and consider the feedback provided.
After the Board put forward this proposal in April, we received insights that helped to craft the rules before us today and ensure that the requirements are useful to PCAOB staff, investors, audit committees, and others.
I would like to highlight some of the changes reflected in the recommendation we are voting on today that resulted from feedback received in comment letters. The final recommendation:
Streamlined fee disclosure requirements to provide the most useful information to the public and make it easier for firms to report that information to the PCAOB.
Eliminated the originally proposed requirement that financial statements conform to an applicable financial reporting framework, such as GAAP, and instead, the financial statements must now meet certain minimum reporting requirements that will serve our regulatory needs.
Streamlined the requirements related to firm governance and network arrangements.
Eliminated the proposed acceleration of the special reporting deadline for existing special reporting items to make it easier for firms, especially smaller firms, to provide this information.
Amended the material event reporting requirement to focus on information relevant to a firm’s audit practice – and limit the material event reporting requirement to firms that are annually inspected.
Today’s adoption will help to make the PCAOB’s congressionally mandated oversight more effective and provide investors, audit committees, and others with clear, consistent, and actionable data from audit firms.
This proposal reflects the meticulous work of our expert staff who, collectively, have years of experience and expertise in recommending where improvements to existing reporting requirements can be made.
The amendments before us today are the result of work from staff across multiple PCAOB offices and divisions, and I commend their careful work on these amendments.
As such, I would like to thank the many members of the PCAOB’s staff who have worked on this rulemaking project, including, from the General Counsel’s Office: James Cappoli, Connor Raso, Katherine Kelly, Damon Andrews, and Marc Francis; from the Office of Economic and Risk Analysis: Martin Schmalz, Dylan Rassier, and Carrie von Bose. From the Office of the Chief Auditor: Jessica Watts, Lisa Calandriello, Linnette Klinedinst, and David Ellam; from the Division of Enforcement and Investigations: Kyra Armstrong, John Abell, Brett Collings, Tina Bell, and Kristin VanFossen. And from the Division of Registration and Inspections, my thanks to Christine Gunia, Tim Sikes, Carol Swaniker, Michael Stevenson, Alan Kerwin, Pamela Robinson, Eugene Theron, Kathleen Ostasiewski, Kevin Taylor, and Abena Glasgow.
In addition, I would like to thank my fellow Board Members and their staff for their engagement and contribution over the last several months on this project.
I would also like to thank the contributions of the Securities and Exchange Commission’s staff, including the staff of the SEC’s Office of the Chief Accountant, for their support and assistance.