Statement on Amendments to PCAOB Interim Independence Standards To Align with Amendments to Rule 2-01 of Regulation S-X

I am pleased to support the Staff's recommendation that we amend our independence standards and rules to align with recent amendments the Securities & Exchange Commission (SEC) approved to its own independence rules.

Congress has vested both the SEC and the PCAOB with jurisdiction to establish auditor independence requirements.[1] In exercising our respective authorities, it is critically important for the protection of investors and the public interest that our rules and standards are compatible and, where they overlap, aligned. By aligning our respective requirements, we provide clarity about the criteria auditors must follow to be independent of their clients. Ultimately, audit opinions issued by objective and impartial professionals instill confidence in the public markets that issuers present their financial statements fairly, in all material respects, and, if applicable, a reasonable assessment of their internal control over financial reporting.

We have narrowly tailored the amendments we adopt today to eliminate unnecessary differences and duplicative requirements between our independence requirements and those of the SEC, following the 2019 and 2020 changes the SEC adopted to Rule 2-01 of Regulation S-X. These amendments clarify the professional obligations of auditors with respect to lending arrangements and avoid regulatory confusion and uncertainty related to the common definitions used in our independence requirements and those of the SEC.

In adopting its most recent amendments, after a full notice and comment process, the SEC noted that the "amendments [were] intended to more effectively focus the independence analysis on those relationships or services that are more likely to pose threats to an auditor's objectivity and impartiality."[2] The same is true of the common sense changes we are adopting. In addition to promoting alignment with the SEC's rules, these changes enhance investor protection by better equipping audit committees, issuers, and their auditors to focus on those issues that potentially pose an actual threat to an auditor's independence.

I will close by thanking the PCAOB staff and the staff in the SEC's Office of Chief Accountant for their work on this project. Although we have been working remotely since March, this project showcases our ability to work collaboratively across divisions and offices and with the SEC to effectively and efficiently carry out our statutory mission. I appreciate the significant efforts made and I am pleased to support the amendments. Thank you.

[1] See, e.g., 15 U.S.C. §§ 7213, 78m(a)(2), and 78q(e)(1)(A).

[2] Qualifications of Accountants, SEC Release No. 33-10876 (Oct. 16, 2020).