Statement on the Adoption of the 2025 Budget – The Board is Accountable for Good Stewardship and Outcome-Based Performance

Remarks as prepared for delivery

Thank you, Chair Williams. Today I will be casting my fourth annual budget vote since I joined the PCAOB Board in November 2021. Under this Board, the PCAOB Budget has ballooned by 40% from the 2020 budget of $284.7M.¹Although I supported the past three years’ budgets, I repeatedly urged the PCAOB to exercise fiscal discipline and proactively identify efficiency gains. This year’s proposed budget of $399.7M is a 4% increase from the 2024 Budget of $384.7M. Although the staff has recommended a budget that does not include a double digit increase like the prior two years, I believe the requested increase is neither necessary nor justified for the following two reasons:

• First, since 2018, PCAOB has consistently underspent its budget by over 7% on average.² Every prudent budget formulation officer knows that an agency that consistently underspends its budget authority is unlikely to be successful in defending future requests for more budget authority. If we have not been able to spend on average 7% of our budget authority annually, I question whether there is an actual need for a 4% increase in the 2025 budget. When I look at the broader budget environment at federal agencies including our oversight body (the SEC), I doubt few have seen annual increases in budget authority comparable to that of the PCAOB.
• Second, PCAOB’s mission is to protect investors. I believe that we can fulfill our mission of investor protection by helping audit firms and their personnel succeed, which will also benefit investors and enhance the resilience and robustness of our capital market ecosystem. Although the number of activities and output under this Board has increased dramatically, audit quality outcomes remain elusive especially based on PCAOB’s own measurement of deficiency rates. The PCAOB continues to use its highly publicized 46% deficiency rate in the 2023 inspection reports as an indicator that audit quality is deteriorating.³ Indeed, deficiency rates have consistently increased under this Board, to the historical high of 46% from 29% in 2020, 34% in 2021, and 40% in 2022 ⁴. One may wonder if the PCAOB’s 40% budget increases since 2020 has not helped improve audit quality, is it time to think differently about its resource allocation? As a Board Member, I believe that we should be held accountable for good stewardship and outcome-based performance. It would be irresponsible to continue the same path of not achieving outcomes that investors deserve.

For these reasons, I do not support this proposed 2025 budget. I would like to express my thanks to PCAOB COO Jamey McNamara, CFO Holly Greaves, and Budget Officer Jim Hearn who continue to work diligently each year on the budget. I also thank the PCAOB Division and Office Directors, and the rest of the PCAOB staff, who have worked tirelessly to formulate this budget.

I now have a few questions for our Chief Financial Officer Ms. Greaves:

1. Why are we asking for more when the budgets have historically been underspent?
2. What efficiencies do you hope to see or anticipate in 2025 to support fiscal stewardship?

Thank you.