Statement on the Adoption of Charters for the Investor Advisory Group (IAG) and the Standards and Emerging Issues Advisory Group (SEIAG)

Good morning.

I would like to thank Chair Williams and my fellow Board Members for moving quickly to establish the PCAOB’s two new advisory groups--the Investor Advisory Group (IAG) and the Standards and Emerging Issues Advisory Group (SEIAG).

These groups will provide important information for the Board and our staff to consider, and they can help sustain a productive, and hopefully continuing, dialogue highlighting the perspectives of investors, public companies, directors, auditors, and academics.

It is important that we recruit a diverse set of members for each group – diverse in background and diverse in experience. The groups are not interest groups; they are sources of knowledge, opinion, and, if necessary, criticism brought together to help the PCAOB do its job.

The Charter of each group lays out the Board’s expectations. Considering the business environment, the financial reporting requirements, and other complex issues, shaping audit standards for the future is not a one meeting job, and I hope the members of the Standards and Emerging Issues Advisory Group will take the long view.

Add to that, the fact that auditing has become increasingly complex as reporting environments and information systems have grown, and the experience of these individuals – as audit committee members, CFOs accountants, or academics – can be of real use.

The Investor Advisory Group has an equally important role to play. The PCAOB exists “in order to protect the interests of investors and further the public interest in the preparation of informative, accurate, and independent audit reports . . ..” Listening to investors, and robust investor outreach are top priorities for this Board.

The federal securities laws purposefully created a unique relationship between public company auditors and investors. As one former SEC Commissioner opined, following the events of the 1930s, “the auditor became the surest friend of the investor.” [1]

The Supreme Court also stated that “the independent accountant assumes a public responsibility transcending any … relationship with the client.”

The standardized audit report remains the main communication method between auditors and investors. But communication is typically only one way. And it is hard for investors, whose own interests can differ, to contribute to the consideration of public policy.

By today’s action, the PCAOB recognizes the importance of investor views and perspectives in executing its mission to oversee the audit of public companies.

The Group’s Charter makes clear the Group’s obligation to advise the Board about investors’ views related to the auditing profession, to current regulatory issues, and to other matters arising from the Board’s oversight activities.

We simply cannot fulfill our mission without having investors at the table.

Finally, I look forward to the two groups meeting for the first time as soon as practicable.

 Again, I want to thank the Chair and my fellow Board Members for giving priority to standing up the two new Advisory Groups.

[1] See AA Sommer, Jr., Commissioner, U.S. Securities and Exchange Commission, The Legal Liability of the Accountant (Sept. 1973).