August 2, 2022

SOX Reflections: PCAOB Chair Discusses Unfinished Business

Over the past few weeks, we have seen a number of reflections on the impact of the Sarbanes-Oxley Act on its twentieth anniversary. Last week, Liz noted the remarks of Chair Gensler at a program hosted by the Center for Audit Quality, and I noted a program that I had the honor of moderating for the SEC Historical Society. Last week, the Council of Institutional Investors hosted PCAOB Chair Erica Williams for remarks on the twentieth anniversary of SOX and the establishment of the PCAOB.

After recounting the events that led up to the enactment of SOX, Chair Williams noted the many accomplishments of the PCAOB and the overall impact of the auditing regulator on the quality of audits. Going forward, Chair Williams outlined the three key areas that the PCAOB is addressing: (i) modernizing standards; (ii) enhancing inspections, and (iii) strengthening enforcement. On the standard-setting front, Chair Williams noted:

When the PCAOB was first getting off the ground in 2003, it adopted existing standards that had been set by the auditing profession on what was intended to be an interim basis.

Twenty years later, far too many of those interim standards remain unchanged.

The world has changed since 2003. And our standards must adapt to keep up with developments in auditing and the capital markets.

Our current short-term and mid-term projects will address more than half of the remaining interim standards from 2003.

And we don’t intend to stop there.

Chair Williams went on to discuss the PCAOB’s ambitious standard-setting agenda, as well as efforts to enhance inspections. Chair Williams also addressed an aggressive enforcement approach, noting “[w]e intend to use every tool in our enforcement toolbox and impose significant sanctions, including substantial penalties, to ensure there will be consequences for putting investors at risk.”

– Dave Lynn