Statement on Proposed 2013 Budget and Strategic Plan

The 2013 budget and related strategic plan are the result of considerable effort and thought by board members and senior programmatic staff.

I want to express my appreciation for our Chief Administrative Officer, Darrell Pauley, our Deputy CAO, Bill Wiggins, Yoss Missaghian and Bobbie Reichert from our budget office. I also want to thank the SEC's Deputy Chief Accountant Brian Croteau, Associate Chief Accountant Amy Hargrett, and CFO Ken Johnson, for their advice and for making themselves available for consultation throughout the development of both the budget and our strategic plan.

The Board adopted a major new strategic plan last November, in connection with adoption of the 2012 budget. But it is a five-year plan. It built on the work of the founding board but brought that work forward to address current challenges and expectations for the organization.

The plan before the Board today reflects modest updates and adjustments, twelve months later, to support the 2013 Budget. As required by SEC rule, the Board submits each annual budget with a corresponding five-year strategic plan.

Importantly, the new plan includes a new strategy to underscore the continuing development of the PCAOB's Global Network Firm Inspection Program, as well as a new strategy related to standard-setting for audits of emerging growth companies, in light of recent legislative developments.

Since last November, we have brought on a new Director for our Office of Research and Analysis, Greg Jonas. We have also adopted a new IT governance framework. Therefore, the plan also includes an updated strategy related to managing knowledge and leveraging IT, reflecting enhancements to our IT governance and the direction and insights of our new Director for our Office of Research and Analysis.

The plan also sets forth certain near-term priorities for 2013, relating to improving the timeliness of PCAOB inspection reports and remediation determinations, and deepening our analysis of inspection information. And, finally, we intend to devote considerable attention in 2013 to making our standards-setting process as effective as possible, including through greater use of economic analysis.

The $245.6 million budget supports the strategic plan and reflects the challenges the PCAOB faces as it seeks to fulfill its investor protection mission. It provides for a modest increase in staff to do so, mainly for inspections.

The new inspection staff are necessary for important work. They will allow us to increase resources dedicated to evaluating global network firms' remediation of identified quality control deficiencies and to supporting field inspection activities, including additional resources to prepare and wrap-up inspections work. They will also allow us to issue more and timely summary public reports on insights and trends gleaned from inspections.

Our Global Network Firm Inspections Program is also expanding work around the world. Several European jurisdictions have recently opened their doors to PCAOB inspections, including the Netherlands, Germany, and Spain.

These will be important inspections. We are fortunate to be able to conduct them now. They will also be important for building strong working relationships with our counterparts there.

The budget also provides for a modest increase in staff to conduct inspections of broker-dealer audits as part of the interim inspection program we commenced in 2011. The purpose of the interim program is to gather information to determine the scope and methodology for a permanent program.

In 2013, we plan to inspect 60 firms that audit broker-dealers, and portions of 90 of those firms' broker-dealer audits. In addition, the Division of Registration and Inspection will continue to dedicate resources to program-building activities, including development of an inspection methodology for the permanent broker-dealer program and related inspection tools.

Given all the work and support that has gone into the budget, I am comfortable that it is appropriate and should be submitted to the SEC for its approval.