The 2014 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, Jim Hearn, Yoss Missaghian and Bobbie Reichert from our budget office, and our Secretary, Phoebe Brown, who worked tirelessly on refining the initiatives in our strategic plan throughout the year. I also want to thank the SEC's Deputy Chief Accountant Brian Croteau, Associate Chief Accountant Amy Steele, and CFO Ken Johnson, for their advice throughout the development of both the budget and our strategic plan.
One of the most significant elements of the PCAOB's 2014 Budget and related strategic plan is its emphasis on the use of economic analysis in the PCAOB's work. We have had economists in our Office of Research and Analysis for years. But earlier this year, we hired our first economist in the Office of the Chief Auditor.
We plan to hire additional economists to work with him, to embed economic thought and tools in the standard-setting process, from the early development of ideas and alternatives to solve problems in audit practice, through the stages of soliciting public comment and preparing a new standard. These economists will also work closely with economists in our Office of Research and Analysis, who can provide a fresh review of the economic effects of the standards.
As we have built this foundation, we have kept an eye toward the broader implications of our work and broader uses of economic thought. After several months of planning, I am pleased that we were able to announce earlier this month the formation of a new PCAOB Center for Economic Analysis, headed by the renowned University of Chicago economist Luigi Zingales.
Under Professor Zingales's expert leadership, we plan to attract other top economists to work in the Center to advise us on how economic theory, analysis, and tools can enhance the effectiveness of PCAOB programs. In addition, we hope to spur research on the role of the audit in capital formation and investor protection.
The PCAOB's 2014 Budget also reflects several key developments in the last year, including —
- further development of our broker-dealer oversight framework, including the Commission's adoption of final rule amendments requiring audits of registered broker dealers to be conducted under PCAOB standards, our adoption of attestation and audit standards for broker-dealer audits, and issuance of our second report on our interim inspection program;
- our progress on the near-term priorities I expressed in the Chairman's Message in the strategic plan we adopted last year, relating to enhancing inspection and standard-setting processes and analyses, more timely issuance of inspection reports and determinations on firms' remediation efforts, developing audit quality indicators, and doing more to help audit committees understand and use our work. Based on this progress, there are several new permanent workstreams in the new strategic plan;
- greater access to cross-border inspections, based on new cooperation agreements we have reached or are close to finalizing with several foreign counterparts;
- renewal in July 2013 of the European Commission's Adequacy Decision, which allowed us to renew the many cooperation agreements we already had with audit oversight bodies in Europe;
- the Memorandum of Understanding on Enforcement Cooperation that we reached with Chinese regulators;
- the PCAOB's leadership role in the International Forum of Independent Audit Regulators;
- issuance earlier this year of PCAOB staff guidance on professional skepticism and internal control over financial reporting, to address the urgent need for improvement in these areas; and
- looking forward, our proposal to change the auditor's reporting model, to better suit the needs of modern capital markets, which I hope will engage the public in a broad and constructive debate about the role of the audit fostering broader and cheaper access to capital for businesses and entrepreneurs.
The 2014 Budget provides for a modest increase in staff, primarily in inspections and economics, to address these developments and support the strategic plan. 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.