Public Company Accounting Oversight Board chair Erica Williams told Accounting Today that the role played by the PCAOB can't simply be "cut and pasted" into the Securities and Exchange Commission after the House Financial Services Committee
Speaking on the sidelines of Baruch College's annual financial reporting conference in New York on Thursday, the day after Republicans on the committee voted to advance the bill, Williams declined to speculate on what would happen in the event of a
"I will say that I think that investors are better protected because of the PCAOB, and I also think that the audit expertise and talent of our staff cannot be cut and pasted for investors, especially at this time of market volatility," she said in an interview. "I think that the expertise of our staff is unmatched and irreplaceable."
She noted that the PCAOB has provided technical assistance to the committee's ranking member Rep. Maxine Waters, D-California, and would be happy to provide any additional technical assistance. Williams pointed to the agreements the PCAOB has with audit regulators around the world to do inspections, and its hard-won efforts to secure access to inspect auditing firms in China. She noted during a speech Wednesday at a meeting of the PCAOB's Investor Advisory Group that those agreements are
She was asked whether the SEC would be able to renegotiate the PCAOB's agreement with Chinese authorities, given the rocky state of relations now between the U.S. and China.
"I don't know if they'd be able to renegotiate it, but in order to be able to inspect and investigate completely there, as required by the HFCAA, they would need to have a new statement of protocol," Williams replied. "History tells us that in times when the economy is tight, this is what companies do, so if there is a period of time when no one is watching, that's when investors will be put at risk."
The SEC is taking a friendlier stance toward the cryptocurrency industry,
Williams was asked about enforcement of audits of crypto companies.
"To the extent that companies are public companies with investors, we absolutely have been focused on the inspections of public companies who have involvement in cryptocurrency," Williams replied. "That's one of the areas of focus in our inspection reports, and we also have staff that are really expert in that area and happy to provide that expertise out there. But in general, what I can say is our staff is the most talented, dedicated, qualified folks. I worked with the SEC for more than 11 years. They are very expert in what they do and very different in what they do."
She was asked about the possibility of people from the PCAOB being transferred over to the SEC.
"I think they would need to take on hundreds of new staff who have the qualifications to do these types of inspections that we do," said Williams. "Every single member of the PCAOB that was critical to us being able to deliver on our investor protection."
Williams was also asked about the standards that are currently on hold at the PCAOB, such as
"I can't speculate on what might happen with the standards, but of course, in order for our standards to be implemented, they have to be approved by the SEC, so we want to make sure we're aligned, and I need to have a discussion with Chairman Atkins, which I anticipate will happen to make sure that we're aligned in those areas," she said.
Asked about the possibility of the PCAOB operating as a subsidiary of the SEC, Williams replied, "That would be up to Congress."
The legislation is expected to become part of the massive tax and budget reconciliation bill that is currently working its way through Congress, and would take effect in a year after enactment. Williams was asked about the possibility of alterations in the bill before it's passed, but she declined to speculate on what might happen. "There's a lot of uncertainty and a lot of questions that need to be answered," she noted.
The proposal to fold the PCAOB into the SEC was among the ideas that were part of the Heritage Foundation's Project 2025 plans for the Trump administration, but the legislation seemed to emerge just in the last few days, and many observers were surprised at how quickly it moved. Williams was asked if she had much advance warning about the bill.
"We weren't asked about technical assistance," she replied. "But what I can say is, our work protecting investors doesn't stop. So we have inspectors all around the world conducting inspections. We have people who are doing enforcement investigations. We have folks who are helping to make sure that firms are prepared to implement our standards, quality control and others. So our work and our focus is really on our mission, and that's what we're continuing here. "
Williams also touched on Wednesday night's vote during her speech at the Baruch College conference.
"I am deeply troubled by legislation passed by the House Financial Services Committee that proposes to eliminate the PCAOB as we know it," she said. "The integrity of our markets is not inevitable. It takes vigilance to guard against negligence, recklessness, and fraud that threaten our system and the people who depend on it. The PCAOB plays a vital role in that effort — a role our talented and dedicated staff have developed over decades, building unique experience and expertise that cannot be simply cut and pasted elsewhere without significant risk to investors at a time when markets are already volatile, and investors have so much to lose."
On an earlier panel featuring officials from the Securities and Exchange Commission and the Financial Accounting Standards Board, moderator Norman Strauss of Baruch College's Zicklin School of Business asked about the impact of the legislation. SEC acting chief accountant Ryan Wolfe declined to comment specifically on the legislation other than to say he was aware of it, but added, "What I can say, with respect to the FASB issue, is just re-emphasizing the importance of an independent standard-setter. … We're interested in supporting that in any way that we can. It's obviously critical to the financial reporting ecosystem."
"We've been around for a little over 50 years, and one thing I think we've certainly benefited from is we have a pretty narrowly focused mission: it's financial accounting," said FASB chair Richard Jones. "But while independent standard-setting is important, I sometimes worry about that term, because independence doesn't mean us being unaccountable. We're accountable to our stakeholders, and we earn the right to set standards by the standards we set."
