Statement at Open Board Meeting to Consider Releasing Draft of Five-Year Strategic Plan for Public Comment

Good Morning. I am pleased to join my colleagues in releasing this draft PCAOB strategic plan for public comment. 

As Chair Williams said, the PCAOB’s mission is straightforward: to protect investors and further the public interest in the preparation of informative, accurate, and independent audit reports. 

Congress carefully crafted our mission twenty years ago by the Sarbanes-Oxley Act of 2002. SOX (Sarbanes Oxley) demanded accountability from both corporate executives and independent auditors. [1] Enron, World-Com, and other corporate scandals exemplified the belief that corporate executives had lost their way. That public companies had played fast and loose with accounting and reporting rules until corporate earnings were often phantasmic. 

From January 1997 to June 2002, there were 919 announced accounting restatements. Those involving accounting irregularities increased by 145%. Investors watched from the sidelines as over $100 billion in market capitalization vanished-- as one company after another announced its own faulty earnings report. [2] 

There were no early warnings. There were no alarms. Investor confidence in the U.S. capital markets plummeted. The system, which was not without its checks and balances, had failed. The responsibility for validating those faulty earnings reports fell on the shoulders of the independent auditors. [3] Audit report after audit report failed to identify misstatements or provide investors with warnings of impending failures. Unfortunately, independent auditors had numerous conflicts of interest, some of which involved selling to their clients, public companies, as many services as possible. 

Passed in 2002, the Sarbanes-Oxley Act was a return to foundational principles. It created a new audit firm regulator, the PCAOB, that would (1) prioritize the needs of investors; and (2) ensure the independence and competence of auditors. 

As our Chair, Erica Williams, has stated: "the heart of our mission is the people who invest in public companies.” And I am pleased that the proposed Strategic Plan reflects this focus.

I support the Plan’s attention to our inter-related standards, inspections, and enforcement programs. I want to emphasize my belief that the choices within all these programs must look first to the interests of investors. Our plan recognizes that maintaining investor confidence in financial reporting requires constant work and attention. Our employees are vitally important to this work. That is why our plan also focuses improving the work lives of PCAOB employees.  

While the strategic plan is a draft, we are inviting public comment and are already taking steps to actualize it:

  • We have formed two new PCAOB advisory groups, with an elevated voice for the investor;
  • We have begun to modernize our standards, with investors in mind; and
  • We are looking at all our work through the lenses of investor protection and the public interest. 

I want to thank our Chair, Erica Williams, for her leadership in shaping a new strategic vision for the PCAOB. I also want to recognize the Chair’s staff, especially Martha Kidd, for all their work in bringing us to where we are today. 

To close, I am happy to support our making the PCAOB’s draft 2022-2026 Strategic Plan available to the public, and I look forward to receiving your comments. Thank you.

[1] In 2002, Congress passed the Public Company Accounting Reform and Investor Protection Act (also known as Sarbanes-Oxley Act) in response to a series of corporate frauds—in particular, Enron and WorldCom. The Sarbanes-Oxley Act was an overwhelmingly bipartisan effort (99-0 in the Senate; 334-90 in the House) to strengthen our capital markets. President George W. Bush quickly signed the bill into law, which was characterized as “the most far-reaching reforms of American business practices since the time of [the Securities Act].”

[3] See U.S. v. Arthur Young & Co, 104 S. Ct 1495, 1503 (1984). In 1995, Congress (in overriding a presidential veto) again called on the independent public accountant to assume the “role analogous to that of a detective, charged with the responsibility to ‘ferret out fraud’ and other illegal acts. See Andrew W. Reiss, Powered by More Than GAAS: Section 10A of the Private Securities Litigation Reform Act Takes the Accounting Profession for a New Ride, 25 Hofstra L. Rev. 1261 (1997), available at