Speech by SEC Commissioner:
Remarks Before the SEC Open Meeting on the 2007 PCAOB Budget
Commissioner Roel C. Campos
U.S. Securities and Exchange Commission
December 4, 2006
I am delighted to support the PCAOB budget that is before us today. In the almost four years since the PCAOB first "opened shop" it has accomplished a tremendous amount for the benefit of our markets and investors.
The PCAOB has been a vital partner to the Commission in implementing many of the most critical Sarbanes-Oxley reforms. It has registered more than 1600 accounting firms in more than 80 countries, and currently employs over 450 people who help the organization fulfill its mission of overseeing the auditors of public companies, protecting the interests of investors, and furthering the public interest in the preparation of informative, accurate, and independent audit reports. Thanks to the PCAOB's work we have seen huge improvements in audit quality, investor confidence, and overall corporate governance.
This very comprehensive budget reflects many months of close-knit teamwork and coordination between our two organizations, and so I would like to thank everyone at the SEC and at the PCAOB who worked tirelessly to get us here today. I also would like to give a very public thanks to former acting PCAOB chairman, Mr. Bill Gradison, who spearheaded the effort at the PCAOB to create a more robust and transparent budget review and approval process, and to current PCAOB chairman, Mr. Mark Olson, who has carried out this new process very successfully in his inaugural year.
I was very involved in promoting a firm, but reasonable budget process in which both our staffs would interact, analyze, and prepare a sound and appropriate budget on an annual basis. Process is critically important to ensuring that the PCAOB's budget is created and considered in a timely and comprehensive manner, and with the full input of relevant staff at both the PCAOB and the SEC. Therefore, I was very happy to support the PCAOB budget process rule that was adopted by the SEC in July of this year. This rule sets forth a very clear and reasonable framework for annual approval of the PCAOB's budget, and memorializes a framework for ongoing communication, transparency, and feedback between the PCAOB and the SEC beginning in March of the year prior to the budget that is being considered and ending with the Commission's approval in December of that same year.
Although the PCAOB budget process rule is not effective until the fiscal year 2008 budget, I am glad to see that both our staff and the PCAOB's staff used their "best efforts" to comply with the timetable set forth in the rule this year. Our budget dialogue with the PCAOB began early this spring, included countless briefings and communications between our relative staffs, engaged all of the Commissioners' offices, and has culminated in the recommended package that is here today.
I believe that the current PCAOB budget for fiscal year 2007 appropriately reflects the successful maturation and growth of an organization that is currently making the challenging transition from a rapid-growth start-up to a stable and efficient operating company. The total package also positively reflects many months of feedback, review, and communication between the PCAOB and the SEC on issues ranging from the purely administrative -i.e., compensation, benefits, and facilities - to strategic decisions that have wide-spread policy and programmatic implications in core substantive areas like inspections, enforcement, and the Office of the Chief Auditor.
In carrying out our statutory mandate to oversee the PCAOB, however, we also have had to think carefully with the PCAOB about its immediate and long-term objectives, and the resources that will be needed to meet those objectives. I remain steadfastly committed to ensuring that the PCAOB has all of the resources and tools necessary to protect investors through effective monitoring of audit firms and improvements in the quality of audits. For example, I fully support the PCAOB's desire to bolster and enhance its Enforcement program - after more than three years of inspecting thousands of public company audits and audit firms, it is absolutely appropriate for the PCAOB to anticipate and prepare for follow-on Enforcement actions. Similarly, I continue to support the PCAOB's need for flexibility and discretion in recruiting and hiring the most qualified professionals. In today's competitive marketplace, the PCAOB must be equipped with the necessary resources and tools to hire the brightest and the best. Its important investor protection mission requires no less.
However, I also recognize that as the PCAOB approaches an era of more stable growth and establishment, it is an appropriate time for both the PCAOB and its overseeing body, the SEC, to find ways to maximize efficiencies and streamline costs, where possible. To that end, I'd like to thank the PCAOB and Chairman Olson for seriously considering and incorporating our suggestion that it reduce certain expenditures. Such reduction should allow the PCAOB to identify and reduce certain inefficiencies and redundancies, without harming or restraining its programmatic goals.
I am also anticipating a very successful conclusion to the very exacting and exhausting work of revising the Sarbanes-Oxley Section 404 framework. The expected changes to current Auditing Standard #2 and our upcoming management guidance should balance very well critical investor protections while also creating a better environment for efficient audits of internal controls. I firmly believe that these changes will lead to smarter and more efficient audits for both larger and smaller companies.
Thank you again for preparing such an excellent PCAOB budget. I am happy to support it.