Skip to content

Chair Erica Williams Discusses PCAOB Priorities

Soyoung Ho  Senior Editor, Accounting and Compliance Alert

· 6 minute read

Soyoung Ho  Senior Editor, Accounting and Compliance Alert

· 6 minute read

During a financial reporting conference, PCAOB Chair Erica Williams provided her vision and priorities for the organization, which include robust inspection and enforcement programs to protect investors and a highly ambitious standard-setting agenda to improve audit quality.

“I look at enforcement and the interconnection between enforcement and our standard setting as being things that are really intertwined,…and I was a litigator by training, and so I deeply care about the importance of a robust enforcement program,” Williams, who became chair in January, said during a fireside chat with PCAOB Inspections Director George Botic at the 40th Annual SEC Financial Reporting Institute Conference hosted by the University of Southern California’s Leventhal School of Accounting on June 2, 2022. The fireside chat was pre-recorded.

“From my perspective, our standards are really only as good as our ability and willingness to enforce them. And so, in many ways, for the PCAOB’s oversight ecosystem to function at its best, standard-setting, inspections, and enforcement really need to complement each other,” Williams said. “And our enforcement program needs to serve as an important deterrent against non-compliance—both a specific and a general deterrent.”

Williams: Violation Should Not be More Profitable than Compliance with Standards

In her view, for the PCAOB’s enforcement to be an effective mechanism to deter wrongdoing, the board should be able to use all the tools available and be willing to use them to the maximum extent possible if the misconduct warrants it.

“The way I think about enforcement is it can’t be the violation of our standards is more profitable than compliance with our standards, and robust enforcement helps to ensure that,” Williams said.

To achieve the deterrence goals, the PCAOB during her tenure brought enforcement actions under rules and statues that were not used before and also imposed the largest penalty on an individual. (See To Send a Message, PCAOB Fines Former KPMG Vice Chair $100,000 For Inspection Cheating Scandal in the April 6, 2022, edition of Accounting & Compliance Alert.)

Still, there is always room for improvement.

“We are going to continue to use all the tools that we have to bring cases and a portion of the appropriate penalties and sanctions and as we execute our enforcement program, which is really going to be continuing to think about deterrence, because we believe that that is what really helps to protect investors.”

Ambitious Rulemaking Agenda

A month ago, the PCAOB unveiled an ambitious agenda with 10 on short-term and mid-term standard-setting projects and two on the research agenda. (See New PCAOB Leaders Set Ambitious Standard-Setting Priorities in the May 6, 2022, edition of ACA.)

Williams said that the board has already begun trying to meet the standard-setting goals.

In her view, the agendas align with the board’s objective to promote audit quality, to protect investors, and further the public interest in public company audit work.

Among other things, she mentioned projects to strengthen the lead auditor’s supervision of other auditors that participate in an audit, improve a firm’s quality control, and elevate the auditor’s responsibilities related to a company’s going concern—or the ability of the company to stay afloat.

As for data and technology research project, Williams said that the board is continuing to evaluate the impact of technological changes to financial reporting and audit practices to see if changes to the audit standards or other guidance are needed. Audit evidence is the other project on the research agenda. And she asked audit firms and others to provide input, including data to better inform the board’s thoughts on the projects.

The PCAOB has an overall standard-setting project on interim standards. When the board was founded, the AICPA’s standards were adopted as interim standards. And over time, the board adopted its own standards, superseding many of the AICPA GAAS.

“This board really thinks it’s high time that we update those interim standards and make them current,” Williams said.

Separately, during an interview on May 26, Vanessa Teitelbaum, senior director for professional practice of the Center for Audit Quality (CAQ), said that the organization on behalf of the auditing profession is very supportive of efforts to update and modernize all standards, calling the projects on the agenda very comprehensive. CAQ is an affiliate of the AICPA.

Overall, the PCAOB has 55 standards with 28 interim standards. Not all of them are tackled in the agenda as some projects are completed, but the agenda encompasses almost everything.

“I think that’s an important necessary appropriate action for the regulator to take to assess whether they continue to be fit for purpose, and some of them are sure a bit evergreen, stand the test of time, and some do need to be modernized as the industry changes as the way companies prepare financial statements changes as technology evolves,” Teitelbaum said. “This to me, it seems like a soup to nuts evaluation…. I think it’s a good it’s an appropriate effort to evaluate all the standards. And some may need changes and some may not, but we’re supportive of modernizing and refreshing auditing standards as things change.”

More Timely Publication of Inspection Reports

In addition, for the PCAOB to be able to carry out its mission to the best of its abilities, Williams said that she wants timely and transparent audit inspections to hold accounting firms accountable.

The board’s inspections program has been credited for making audit quality better over the years. Williams said that she wants to continue to improve the program, including more timely issuance of inspection results and provide more relevant information in inspection reports.

“We also want to make sure that we’re being nimble in the program so that we’re being responsive to new and emerging issues on … for example, SPACs and De-SPACs,… how the current rise in inflation is having any impact on company’s operations,” the PCAOB chief said.

Staff Satisfaction

Williams said that one of her priorities is making the PCAOB an even better place to work. This in part comes as the Great Resignation has been affecting not only companies but also regulators.

“We can’t protect investors if we are not taking care of our dedicated staff,” she said. “And so, one of my highest priorities is to work to improve and enhance our staffs experience.”


This article originally appeared in the June 6, 2022 edition of Accounting & Compliance Alert, available on Checkpoint.

Get all the latest tax, accounting, audit, and corporate finance news with Checkpoint Edge. Sign up for a free 7-day trial today.

More answers