PCAOB OKs five-year strategic plan and 2019 budget

The Public Company Accounting Oversight Board, with a new set of board members this year, approved a strategic plan for 2018-2022 on Thursday, along with a fiscal year 2018 budget.

The new strategic plan reflects the new values and strategies the board plans to advance over the next few years to fulfill its mission. The 2019 budget is $273.7 million and provides funding for up to 838 positions. It includes investments in personnel, processes and new technology. The budget is still subject to approval by the Securities and Exchange Commission.

“With the arrival of five new board members earlier this year, the PCAOB began a process of reassessing and renewing its commitment to the mission of protecting investors and furthering the public interest in the preparation of informative, accurate, and independent audit reports,” said PCAOB board member James Kaiser. “The result is a five-year plan that is innovative, yet practical, and one that I fully support.”

As part of the strategic plan, the PCAOB intends to drive continuous improvement in the quality of audit services and more clearly communicate its assessment of audit quality. The board said it will also be more innovative in its oversight activities—particularly with respect to its approach to inspections and standard setting—and at the same time prepare for significant market-driven changes in the audit profession. The board also plans to engage more often and more directly with a broader array of investors, as well as with audit committees, preparers, and other stakeholders about the quality of audit services. The plan also embraces optimization of operations and enhancement of the culture of the organization.

“The strategic plan that we are voting on here today establishes our collective view not only on how to further improve audit quality,” said PCAOB board member Kathleen Hamm. “It also establishes our vision on how to transform the PCAOB into a more agile, innovative regulator in pursuit of our mission. A mission grounded in protecting investors and the public interest through the preparation of informative, accurate, and independent audit reports.”

The PCAOB received 31 comment letters on a draft version of the strategic plan. In response, it made a number of changes, including altering one of the goals to include regularly assessing its oversight activities, and the processes and technology that support them, to ensure their ongoing effectiveness in improving the quality of audit services. A number of commenters also encouraged the PCAOB to address specifically inspection reporting in the draft, with an emphasis on improving both what information we report and how we report it, so the strategic plan now explicitly identifies inspections reporting as a key part of the PCAOB’s strategy.

“I believe the plan’s goals and objectives are responsive to the insights we have gained,” said PCAOB board member Duane DesParte. “They lay out the path forward, in the current environment, for fulfilling our audit oversight mandate to protect investors and further the public interest.”

Several commenters asked for the strategic plan to specifically reference financial statement preparers as a relevant stakeholder groups, so various parts of the plan now specifically identify preparers as a relevant stakeholder group. Some commenters also requested the final plan reference coordination of the board’s oversight activities with domestic and international standard-setting organizations, so the plan now includes a specific reference to engagement with such organizations.

“The board’s adoption of the strategic plan and accompanying budget paves the way for fulfilling our shared vision for the PCAOB," said PCAOB Chairman William D. Duhnke in a statement. “I look forward to working with my fellow board members and our talented staff to achieve the goals and objectives we’ve set forth.”

The budget includes funds for some extra hires and functions at the PCAOB. “The proposed 2019 budget reflects careful consideration of the resources we, as an organization, need to carry out our statutory mission to protect the interests of investors and the public interest,” said PCAOB board member J. Robert Brown Jr. “This budget includes an investment in human capital in the form of increased training opportunities as well as an increased headcount. With respect to the increase in headcount, some of that comes in the form of newly created positions such as a chief compliance officer, a chief information security officer and a chief risk officer. The budget will also add liaison positions that will conduct outreach to our stakeholders, including investors. I fully support all of this.”

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