Statement on the PCAOB 2019-2023 Strategic Plan and 2020 Budget

Thank you, Mr. Chairman.

I am pleased to support the Board's Strategic Plan and 2020 Budget. Our five-year Strategic Plan reflects the continuing goals and major strategic initiatives of the Board. In particular, I'd like to talk briefly about three important areas: investor outreach and engagement; budget transparency; and investing in our people.

Investor Outreach

We committed in our Strategic Plan to "understand and consider investors' audit expectations". Over the past year, we have created a position designed to be a liaison with, and direct point of contact for, investors, audit committees, and preparers.^[1] We have reached out to these stakeholders and sought feedback through a variety of mechanisms, including meetings, roundtables, and participation in events where these stakeholders were present. I applaud the staff for their ongoing outreach efforts in advancing our strategic initiative and look forward to more opportunities for engagement in 2020.

Outreach, however, is only part of the process of engaging with investors. Transparency plays a critical role in helping the PCAOB fulfill its mission of protecting investors and furthering the public interest.^[2] In my statement last year, I expressed my view that "transparency means more than inviting comments or improving the quality of the information that we push out" and emphasized the importance of taking steps to improve our transparency and reduce our opacity by "becoming more open with respect to our operations and with respect to the information that we collect and produce. . .".^[3]

As I have recently emphasized, to the extent that we, as an organization, are more transparent, about what we do and how we do it, investors and other stakeholders will better understand our process and, rather than wait until we reach out to them, will be more likely to "reach in" to us.^[4] Simply put, increased transparency provides greater opportunity for engagement, which ultimately will improve the quality of our rules, our reports, and our oversight.

Budget Transparency

The approval of the budget today provides an opportunity for increased transparency by the PCAOB.

Once the budget is approved and submitted to the SEC, SEC Rule 190 provides that the "budget and budget justification, subject to any applicable exemption under the Freedom of Information Act . . . shall be made available to the public."^[5] The budget justification includes a discussion of the PCAOB's "programs and activities" in "concise and specific terms. . ."^[6]

Historically, following approval of the budget, we have posted a five-page budget document consisting of high level numbers and definitions.^[7] I would like to see the PCAOB make a detailed version of the budget^[8] and the budget justification more easily accessible.^[9] We could post the information on the PCAOB's website.^[10] As I read Rule 190, there is nothing that would prohibit us from doing this. Steps in this direction would certainly be consistent with our strategic goal of increased transparency.

Our People

Finally, I want to address our exceptional people. The PCAOB is composed of over 780 talented and devoted employees. Approximately three quarters of our budget provides for personnel-related expenses. I cannot overstate the importance of our human capital in achieving the PCAOB's mission. In order to effectively perform our oversight functions, we rely on our ability to attract, retain and develop qualified and skillful professionals.

I am pleased to see that our Office of the Chief Auditor will undergo a modest increase in budgeted personnel next year. There remain a significant number of interim standards adopted by PCAOB when the doors opened in 2003. We continue to work hard at updating these interim standards and I look forward to additional progress in the coming year.^[11]

A critical role of the PCAOB is the inspections process. Nearly half of our budget goes to the Division of Inspections and Registration. The Division is tasked with a number of important functions but mostly conducts inspections of audit firms. We are on course to have inspected approximately 248 firms in 2019, up from 235 last year. In inspecting a firm, we often review multiple audits. We are on course this year to have inspected around 884 audits^[12], up from 812 last year. The numbers reflect the fact that the staff in the Division are working incredibly hard at fulfilling the PCAOB's mission.

The Division, of course, needs adequate staffing. For 2018, the last budget adopted by the prior Board, a headcount of 502 was set out for the Division. In the budget approved last year, we lowered that number to 480. The 2020 budget proposes to maintain the headcount at 480. I look forward to discussions with my fellow Board members over the course of next year on the appropriate number of inspections and the appropriate level of staffing for the Division.

Conclusion

I believe today's budget will help us to effectively achieve our mission.

I also want to join the Chairman in thanking our dedicated staff for their hard work in developing the 2020 Budget and related Strategic Plan, and to my fellow Board members and their staff for sharing their perspectives.

Staff worked particularly hard this year on the budget and devoted significant resources to the process, including continuous engagement with the Commission's staff. With the PCAOB undergoing transformation, the two organizations met at least monthly beginning in February.^[13] The meetings involved a regular team from the Office of the Chief Accountant at the SEC, including Mark Panucci, Matt Hodder, Giles Cohen, Godfrey Murangi, and Mark Jacoby, and a regular team from the Office of Administration at the PCAOB, including Jim Hearn, Yoss Missaghian, Alfredo Azocar, and Bobbie Rose. Our team at the PCAOB operated under the auspices of Sue Lee, the Acting Chief Administrative Officer, and Holly Greaves, the Chief Financial Officer.

Thanks to all of you. We couldn't get this done without your effort. And to all of you that I just thanked, be prepared for another busy year.