PCAOB Outlines Ambitious Agenda After Budget Hike
Last week the Securities and Exchange Commission approved a $258 million budget for the Public Company Accounting Oversight Board. The PCAOB acts as a check on accounting firms that conduct audits of public companies.
That’s right, we spend a whopping quarter of a billion dollars to check the checkers who check the accounting of public companies. That is, of course, after their own internal audit departments check it first.
Of the total budget, $253 million will be collected from public companies and broker-dealers in the form of "accounting support fees." The PCAOB's 2016 budget represents an increase of approximately 3 percent from its 2015 budget of $250.9 million, even though it didn't even spend that full amount.
The 2016 accounting support fee of $253.3 million is roughly 12 percent higher than the 2015 accounting support fee of $226.6 million. The increase, says the SEC, reflects the fact that there is less unused funding to be carried forward from fiscal year 2015 to offset FY 2016 budgeted expenditures than there was last year.
According to the PCAOB, the budget "strengthens our ability to continue to protect investors and to build the trust that facilitates capital formation." PCAOB chairman James Doty outlined the board's 2016 objectives in an open meeting with the SEC on the budget.
He said the PCAOB plans to:
- Continue to improve the reliability of the audit and ensure that it better serves investors;
- Better foresee and adapt to emerging changes in the field and in business models of audit firms, as well as to address any effects that may be detrimental to investor protection;
- Deploy and institutionalize the tools the PCAOB has developed and will need for the long-term to remain strong, independent and innovative; and
- Advance data gathering and analysis and help us become more efficient and effective in our oversight.
The good news for auditors, is that Doty thinks they are doing a better job. "Audits and investor protection have improved significantly, in my view," he said during his speech. The bad news is that the PCAOB has no plans to back off from its tough review process on audits. "As the Commission's recent enforcement actions show, we should remain vigilant," he said. "Pressures and incentives for auditors to cut corners remain a concern and threaten to undermine our efforts and investor protection."
In his speech, Doty also mentioned the PCAOB's push to identify inidcators of audit quality. "We will also continue to monitor the increasing use of audit quality indicators by audit committees and others," he said. "And we'll test the most promising ones, based on comments received on our concept release last year."