Statement in Support of the PCAOB 2022-2026 Strategic Plan and 2023 Budget

Remarks as prepared for delivery

For 20 years, the PCAOB has played a pivotal role in driving improvements in audit quality through its oversight activities. The Board’s 2022-2026 Strategic Plan (Plan) before us today builds upon this legacy and provides us a roadmap for further fulfilling our mission of investor protection in the coming years. 

The Plan focuses on advancing our mission through each of our statutorily mandated oversight programs of standard-setting, inspections, and enforcement.  

High-quality auditing standards are the foundation for high quality audits. Since 2018, we have updated and strengthened our auditing standards in the often judgmental and complex areas of auditing estimates, using the work of specialists, and supervising audits involving other auditors. 

The Plan commits the Board to further modernize and strengthen our standards, ensuring they are fit for purpose in the current environment, including with respect to advancements in the use of data and technology in preparing and auditing financial statements.  

Our ambitious standard-setting and research agendas are directly responsive to this strategic goal, including the quality control proposal we voted to approve earlier today. 

Per the short-term agenda, the Board will be considering potential improvements to many important standards.  Careful consideration of perspectives across all stakeholders, including from our Advisory Groups, will be critical for our success, and it will be important that we not overwhelm the system.  I encourage investors, firms, audit committee members, preparers, academics, and others to actively engage with us throughout the process, including by providing us comments to our proposals.

The Plan also focuses on further enhancing our inspections program and strengthening our enforcement program.  Like standard-setting, these programs are vital tools in the PCAOB’s regulatory toolbox.

Over the past 20 years, inspections have played a key role in driving continuous improvement in audit quality. 

Building on initiatives in recent years, we will continue to improve the clarity, relevance, and timeliness of information we share from our inspections, including sharing “good practices” and other useful insights with investors, firms, and other key stakeholders, such as audit committees. 

Through our inspection procedures, we identify deficiencies and areas in which auditors need to improve, and we monitor and evaluate firms’ remediation activities.  This supervisory approach to oversight requires constructive engagement and candid and direct dialogue between the inspectors and the audit teams and firms.

It is also imperative that we hold auditors and firms accountable when they violate our rules, especially when such violations are intentional or reckless.  Rigorous enforcement protects investors and promotes deterrence. 

For both inspections and enforcement to be effective, it is important we maintain an appropriate balance between the two programs.

The last goal in the draft Plan is to improve our organizational effectiveness, with an emphasis on investing in our employees and engaging with our external stakeholders. 

Our success is fully dependent on our highly dedicated and capable staff, and we are committed to further fostering a culture of empowerment, inclusion, collaboration, and agility.  

We are also committed to increasing and improving our engagement with investors, audit committees, preparers, and other key stakeholders, including through our recently reestablished Advisory Groups. 

I have considered the 2023 Budget relative to our strategic objectives and priorities, including investing in our people.  I believe the Budget reasonably reflects the required resources to support our 2023 program and operational requirements, particularly in light of escalating compensation and other costs and labor market challenges in recruitment and retention.

At the same time, I am mindful that as stewards of the fees collected to fund our efforts, we must continually strive to operate as effectively and efficiently as possible.  It is important, therefore, that we continue to optimize our program effectiveness, our internal processes, and our information technology investments.

Thank you to Chair Williams and her office, especially Martha Kidd and Rob Ravas; Holly Greaves, our Chief Financial Officer, and her team; my team, Brent Simer, Katie Driscoll, and Lucia Carromba; my other fellow Board Members; and the entire PCAOB leadership team for your creativity and collaboration in developing the Strategic Plan and Budget; and to the SEC for their direction and input. I look forward to working together to achieve the Plan’s objectives to advance our investor protection mission.