Remarks for the PCAOB’s Standards and Emerging Issues Advisory Group

Remarks as prepared for delivery

Good morning. Thank you for being here, virtually. Let me also offer our standard disclaimer that the views I express today are my own and do not necessarily reflect the views of the PCAOB, my fellow Board Members or the PCAOB staff.

The topics you are discussing today couldn’t be timelier. With these topics, you’re really putting the “E” and the “I” into SEIAG today. I’d like to put several questions on the table that I hope this group can help us think through. 

Let me start with AI. AI offers tremendous potential to streamline certain audit procedures and make the audit process more efficient. But it also entails risks. A New York Times Dealbook article from a few weeks ago highlighted how AI can now produce thousands, if not millions, of documents almost instantaneously.¹ How should auditors approach the risks and opportunities in the use of AI by preparers and auditors? How can we support the improvement of audit quality more broadly in areas with higher technological complexity?²

Now turning to digital assets. With the passage of the GENIUS Act this past year, this is an area of rapid change. As this industry grows and matures, and especially as digital assets increasingly interact with the balance sheets of public companies, it’s important we think together about how the audit sector interacts with it.

First is the question of audit standards. How are auditors doing with the standards that are in place today? What are the pressure points, and what is the right balance between standards and guidance for this rapidly evolving sector?³ For example, are we providing sufficient clarity around expectations for the sufficiency of audit evidence regarding the existence and control of the digital asset, including pertaining to digital keys? If we’re not, what are the pros and cons of the possible approaches?

Second, what are the unique features of this asset class that need to be considered from an audit perspective. For example, how do smart contracts and other automated protocols (when utilized) interact with audit expectations? What about decentralization?

Third, valuation and estimates are always important to think about, as they are challenging for many different sectors. How are different digital asset markets developing approaches to valuation? Are insights available from other markets and asset classes that exhibit differing amounts of liquidity, such as commodities and derivatives?

Of course, I look forward to also hearing the questions that you will be asking today. Thank you again for your time, and I look forward to engaging with you—and everyone interested in supporting the evolution of the audit in these two important areas in our financial markets.