Statement to the U.S. Securities and Exchange Commission Regarding the PCAOB’s 2022 Budget

Good morning Chair Gensler and Commissioners Peirce, Roisman, Lee, and Crenshaw.

Thank you for the opportunity to present the PCAOB’s 2022 Budget.

The PCAOB’s mission of investor protection is of vital importance to the functioning and integrity of our capital markets. Our proposed 2022 Budget sets forth the resources required for the Board to carry out our statutory mandate and drive continuous improvement in audit quality.

Given the ongoing leadership transition at the PCAOB, the Board used the organization’s current five-year Strategic Plan as the basis for the 2022 Budget. Once all the new Board members are seated, we will reassess our strategic goals and objectives and the staffing and other resources necessary to meet our updated priorities and needs.

The 2022 Budget of $310.3 million funds 891 positions, and compares to the 2021 Budget of $287.3 million, which funded 859 positions. If approved, the proposed 2022 Budget results in a projected 2022 Accounting Support Fee of $297.9 million, as compared to $263.9 million for 2021.

As stewards of the fees collected to fund our efforts, we must operate as effectively and efficiently as possible. The 2022 Budget includes investments to continue to optimize our oversight programs, our investor and other stakeholder engagement, our business processes and our information technology infrastructure. The 2022 Budget also supports our ongoing commitment to develop, empower and meaningfully engage our people and further cultivate a high-integrity, collaborative and inclusive culture. 

The increased funding in 2022 as compared to 2021 principally reflects cost escalation for inflation, certain additional staff positions and increased travel costs in anticipation of travel resuming in 2022 after being halted given the pandemic.

Our most important resource is our highly dedicated and capable staff. Consistent with prior budgets, personnel costs represent approximately three-fourths of our total spending. As I mentioned, the budget provides for targeted staffing increases, primarily in our inspections and standard-setting programs.

Additional staffing in the inspections area will enable us to continue to be more preventative in our approach and more proactive in adapting to emerging risks. For example, in our inspections we are devoting greater attention to firms’ quality control systems, and we have a designated target team to specifically focus on emerging risks. We will also continue focusing on improving the relevance and timeliness of our inspection reports and other information we share about audit quality, and we will make progress on certain international inspections deferred in 2000 and 2021 given travel and other constraints posed by the pandemic. 

In regards to standard-setting activities, additional resources will support progress on planned new standards (e.g., Other Auditors and Quality Control), provide additional capacity to focus on our Data and Technology and Audit Evidence research projects, and assist with our ongoing efforts to actively monitor and assess developments related to environmental, social and governance matters. In the coming months, we will be reassessing as a new Board our overall standard-setting and research agendas.

Before addressing any comments or questions you may have, I would like to recognize and thank my fellow Board Members and the leadership team at the PCAOB for their efforts in developing this year’s Budget, with special recognition for our Chief Financial Officer and Acting Chief Administrative Officer, Holly Greaves, and her team.  

I also want to thank the Commission staff who provided insight and direction to our efforts, including in the Office of the Chief Accountant, Paul Munter, Acting Chief Accountant, Diana Stoltzfus, Deputy Chief Accountant, and Natasha Guinan, Chief Counsel; in the Office of Financial Management, Caryn Kauffman, Chief Financial Officer; and their teams.

Finally, I thank you for providing me the opportunity to serve as Acting Chairperson during this time of transition, and to continue to serve on the Board. I’ve valued the collaboration and perspectives provided by my new Board colleagues Christina Ho and Kara Stein since their arrival last month. 

I look forward to conferring with them and my other new Board colleagues, Erica Williams, as Chair, and Tony Thompson, in reassessing our strategic objectives and priorities and to working together alongside our staff in further fulfilling the PCAOB’s essential mission.

I am happy to address any comments or questions you may have.