Statement in Support of Firm and Engagement Metrics

Remarks as prepared for delivery

Thank you, Chair Williams.

With both of today’s proposals, the PCAOB seeks to further transparency in the interest of investor protection.

Investors have long expressed concerns around the opacity of the audit. Investors are delivered an audit opinion, with limited information as to how the auditor arrived at the conclusion of the audit. Firm and engagement metrics help fill the void. If adopted, these metrics will shed light into the conduct of the audit, including the expertise and workload of who was involved, hours spent in areas of risk, and insight into the firm’s internal monitoring and partner performance rating processes, which are significant aspects of the firm’s system of quality control.

Many firms currently disclose certain firm level metrics in transparency reports, but today’s proposal would improve metric reporting in two ways. First, by defining the metrics and the associated calculation, it will drive consistency and comparability across the market. With the new Form FM for reporting of firm level metrics, stakeholders can easily access this information in a consistent format. Second, the proposal includes a proposed requirement for Form AP to include engagement level metrics. Investors would now be able to horizontally compare metrics across engagements and firms. This is a level of insight not currently available in the market. These metrics, in particular at the engagement level, would bring a new level of transparency allowing firms to publicly demonstrate the level of audit quality they profess to provide.

I am in full support of today’s proposal, because it could substantially increase transparency of the audit process. It has been a long time coming. 16 years to be exact. From the inception of the idea of metrics as mentioned in the 2008 Treasury ACAP report, to the PCAOB concept release in 2015, to the PCAOB research agenda in 2022, to today’s proposing release in 2024, a significant amount of work has gone into making this a reality.

Back in 2016, the PCAOB’s Investor Advisory Group listed metrics, formally referred to as Audit Quality Indicators, as a recommended top priority for near-term action. Since that time, the PCAOB has continued to conduct extensive outreach to identify the metrics and information of most interest to stakeholders. Today’s proposal is a culmination of extensive internal deliberations and external perspectives received from a variety of stakeholders and experts.  This proposal advances our Strategic Plan objective of having robust dialogue with stakeholders as part of our standard-setting process.¹ I look forward to public input on this proposal.

I would like to thank the individuals involved in today’s proposal including in the Office of the Chief Auditor, Barbara Vanich, Jessica Watts, Stephanie Hunter, Karen Wiedemann, Clair Sever, Akiko Upchurch, and Schuyler Sims; In the Office of Economic and Risk Analysis, Martin Schmalz, Nick Galunic, and Jonathan Fluharty-Jaidee, and in the Office of General Counsel, Connor Raso, Katherine Kelly, Vince Meehan, and Marc Francis; I would also like to thank the staff of the SEC Office of the Chief Accountant, fellow Board Members and their Staff, and my staff.

Thank you. I have no further questions or comment.