Public Company Accounting Oversight Board (PCAOB) member George Botic said the board should continue working on a rule that would require disclosures of audit firm and engagement-level metrics, describing the information as relevant to investors’ and audit committees’ assessment of audit quality.
He made the remarks shortly after the board revised its quality control (QC) standards on September 9, 2026, noting that QC is only one part of the equation needed to drive improved audit quality.
“Another part of what is needed is to get information about that quality into the hands of the people who depend upon audit services and who must choose among auditors,” Botic said at the Annual University of Nebraska at Omaha Accounting Speaker Series on September 11.
“Our goal should be to make available to investors and audit committees information that helps them to identify differences between audit firms that are likely to bear on audit quality,” he said. “For too long, consumers of audit services have been expected to accede to the idea that an audit is in essence what economists call a ‘credence good’ — a black box into which consumers of the good cannot see.”
In his view, it need not remain that way. “It should be possible to shine enough light into the black box to create meaningfully informed consumers of audit services,” he said.
Project history
The board has not adopted the metrics disclosure rule for lack of effort over the years.
The rulemaking project, which was initially called the audit quality indicators (AQIs), was on and off the PCAOB’s agenda after the Treasury Department’s Advisory Committee on the Auditing Profession in 2008 recommended that the PCAOB develop such indicators.
In 2015, the PCAOB under chairman James Doty’s tenure issued a concept release to seek comments on 28 indicators, covering three broad categories dealing with audit professionalism, process, and results. Soon after, the PCAOB shifted to monitoring mode, citing audit firms’ voluntary actions in the area.
In reality, the PCAOB paused the project after auditors—and audit committees to a lesser extent—never fully supported the initiative. The comment letters by the audit firms tended to question why the indicators were needed through a regulatory initiative if accountants could address them through firm-wide policies. In their view, indicators should be tailored and customized to particular audits to be useful.
In particular, they said quantitative measures mean little without qualitative discussions of a particular audit. They also said some indicators, especially those that deal with specific audit engagements, should not be mandated or made public. Auditors and audit committees were concerned that the public might overreact to the information without proper context.
But investors said they are fully capable of evaluating the measures. They also viewed the indicators as an important piece of a more far-reaching plan to use regulations to strengthen auditors’ independence from their clients. Some large investor groups believe the indicators could give them meaningful information when considering their votes to ratify the external auditor and elect the chair of the audit committee.
About a decade later, the PCAOB in 2024 finally adopted the rebranded “firm and engagement metrics” rule while Erica Williams was chair during the Biden administration. Botic supported the rule at the time.
But following a change in administration, the board decided to withdraw a pair of rules intended to increase audit firm transparency: one on audit firm reporting and the other on firm and engagement metrics as firms were never on board with the rulemaking.
Calls for continued work
“Although the Board eventually withdrew its request for SEC approval of that rule in early 2025, that withdrawal did not mark the end of the possibility of such a rule,” Botic said today. “And it is clear that interested parties have not interpreted that withdrawal as marking the end of that possibility.”
Some comment letters urged today’s board to continue the work on metrics.
Today, Botic said he continues to believe that the work ought to continue. He emphasized that the rulemaking should not be about providing information just because investors want it. He believes that this disclosure would help protect investors.
“There is sufficient reason to believe [this] is relevant to assessing the likely quality of a firm’s audit services,” he said. “In other words, the point is not disclosure for the sake of disclosure. Rather, the point is to unleash old-fashioned capitalism by revealing information that is meaningful to the relevant market. Mandating public disclosure of relevant data will cause business to flow toward firms with better metrics. That, in turn, will incentivize firms to work toward metrics that the market rewards, and those metrics should correlate to improved audit quality.”
Botic also said that at the time the metrics disclosure rule was adopted, audit firms and business groups complained that the PCAOB was doing too much too quickly in terms of rulemaking.
That concern today is moot.
“The landscape has evolved in ways that we should consider in connection with metrics disclosures,” Botic said.
“For one thing, it may be useful to consider whether there are disclosure metrics that would be uniquely useful with respect to firms that have accepted private equity investments,” he said. “It remains too soon to tell whether they can – as I am confident they all intend – navigate the related economic pressures over time without cutting corners in ways that put audit quality at risk…. But I believe there is good reason for the PCAOB to focus on whether there are disclosures specific to this category of firms that would help the market spot developments that could portend a risk to audit quality.”
In addition, artificial intelligence was not as prevalent in 2024 as it is now.
“We may want to reconsider our 2024 judgment not to include a metric related to the use of technical resources,” he said. In 2026, “we see evidence of small accounting firms undertaking to compete through innovation by attempting to build their whole audit operation around artificial intelligence.”n
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