Strengthening Audit Evidence (The Auditor’s Use of Confirmation, and Other Amendments to PCAOB Standards)

Remarks as prepared for delivery

Thank you, Chair Williams. Good afternoon, everyone. Today’s adoption of The Auditor’s Use of Confirmation, and Other Amendments to PCAOB Standards is an important milestone in enhancing investor protection. PCAOB previously considered updating the Confirmation standard with the concept release in 2009 and the respective proposal in 2010. In fact, the PCAOB Standing Advisory Group began deliberating on the need to revise the Confirmation standard in September 2004.¹ That means every Board in the history of PCAOB has contemplated this standard to some extent. I therefore have mixed feelings about my vote today. On the one hand, I feel privileged to vote on the adoption of this standard, which represents the cumulative wisdom of all the previous Boards, staff and commenters in the past twenty years. On the other hand, I can’t help but think that this is not the right way to revise standards. As someone with deep standard-setting expertise from my many years at the U.S. Department of the Treasury, I consider standard setting a scientific process that requires thoughtful deliberation as well as expertise where timeliness is crucial. In fact, when it comes to investor protection, I believe being timely and relevant is more important than getting the standard perfect. 

That said, this is a moment to celebrate. This standard strengthens audit evidence requirements for cash, cash equivalents and accounts receivable. In these changing times, one unchanging truth is the prevalence of fraud. In fact, fraudsters are quick in exploiting the vulnerabilities created by the complexity of our capital market ecosystem and the sluggishness of bureaucracies. Fraudsters today are creative, agile, and technologically savvy. To protect investors, we need to be better and faster than them.  

As a result, although the adoption of this standard is an important step forward, I expect that we will soon need to update this standard and other associated standards to adapt to the rapid changes in technology. We owe it to investors not to wait another twenty years. In conclusion, I support the adoption of The Auditor’s Use of Confirmation, and Other Amendments to PCAOB Standards. I want to thank the staff from the Office of the Chief Auditor, with a special thank you to Lisa Busedu and Dima Andriyenko for their leadership, proactive collaboration, and responsiveness; the Office of Economic and Risk Analysis; the Office of General Counsel, and all others that contributed to this standard.  

Thank you. Back to you, Chair Williams.