I want to thank you all for being here this morning. We have seven new members today, joining twelve existing members. We welcome you all.
The PCAOB has accomplished a great deal in its short life of less than 14 years so far, including some major achievements. But they could not have been accomplished without the sustained interest and support of investors, including those here.
In addition, I would like to especially acknowledge how much it has meant to me to have the support of Chair White. Thank you for being here today, for your dedicated attention to the role of the audit in the Commission's investor protection mandate, and for your advice and encouragement over the years.
It is clear that the PCAOB's accomplishments are attributable directly to Congress's foresight in conferring on the PCAOB the responsibilities and powers set forth in the Sarbanes-Oxley Act to register, inspect, set standards for, and when necessary discipline the auditors of public companies and, since 2010, brokers and dealers.
In my view, independent oversight has changed the landscape for the better for investors and capital markets.
- Inspections have improved audits, and changed firms' attitudes and execution. Emerging research on our inspections indicates that when we find deficient audits, the engagement teams raise their game – without a commensurate increase in fees but with a statistically significant reduction in restatements.
- Issuance of regular inspection reports provides meaningful information on audit firms and risks that didn't exist before, and that helps all parties, including investors, audit committees, and companies, make better decisions.
- Enforcement has helped root out bad apples, and fosters trust in the system. Our disciplinary charges are based on expert investigations by lawyers and accountants deeply knowledgeable about auditing, accounting and fraud. They go through careful thought and analysis at the Board level. I believe public disclosure of charges will enhance public trust, and be good for auditors. And so I continue to seek a change in the law to allow us to make those charges public.
- We have issued better and clearer audit standards related to the performance of audits.
- We have also made progress in improving the relevance and transparency of audits. Markets will soon have useful disclosure to differentiate auditors on the basis of track records for quality. I also hope later this year to adopt changes to make the auditor's report more meaningful. I look forward to today's discussion on that topic.
- Awareness of our role and mission is now firmly established, and emerging research suggests this is helping build public confidence in investing.
- The PCAOB has helped foster global recognition of the importance of cooperation. We have tailored a successful model for carrying out joint inspections with our counterparts around the world. By sewing up the gaps in auditor oversight, we enhance the overall reliability of multi-national audits. It is clear to me that the global firms have noticed this regulatory coordination, and are focused on the need to shore up any weak elements of their networks and quality controls.
- Credible, insightful and independent research is critical to understanding how we can have the most powerful and constructive impact for the public good. The PCAOB has established a Center for Economic Analysis to further incorporate meaningful economic analysis in all aspects of our work. By facilitating research on the role of audit in capital markets, we come to more deeply understand the consequences of our work and how to be as effective an audit regulator as possible.
I firmly believe that by improving audit quality, the PCAOB has played a part in helping to avoid financial reporting failures, in turn to help our economy and capital markets be resilient and grow.
But I also believe we must continue to evolve the audit. Technology will be a big part of that evolution, but there is more. I'm glad we've got time on the agenda to discuss non-GAAP, financial disclosures outside the four corners of the financial statements.
We need to shape the audit and audit oversight to meet the needs of investors, and our discussion today and continuing relationship with all of you will help us do that.