In 2002, the U.S. House of Representatives passed the final version of the Sarbanes-Oxley Act on a nearly unanimous vote of 423-3. The same legislation passed the U.S. Senate by a unanimous vote of 99-0.

These vote tallies illustrate the broad-based public support for this law, which was preceded by a series of frauds and accounting scandals that dominated the headlines of the time.

Title I of this landmark law established the Public Company Accounting Oversight Board (PCAOB), with very specific responsibilities: to oversee public accounting firms, foster integrity in the auditing of public companies, and to strengthen financial reporting so that credibility could be restored to our capital markets in the wake of these scandals.

The PCAOB’s vital work ensures that investors, whether institutional or retail, can invest in our markets with the confidence that all issuers are abiding by the highest standards of financial reporting and auditors are fulfilling their duty as gatekeepers and are held accountable when they fall short of their obligations.

Through its recent – and historic – enforcement actions against three China-based audit firms and four individuals, involving the highest civil money penalties it has ever imposed against firms in mainland China and in Hong Kong, the PCAOB demonstrated how valuable its work can be in promoting market integrity. To deter future violations, these actions also included conduct-based obligations.

I am pleased to support the PCAOB’s FY 2024 budget, unanimously approved by the board.

Our free enterprise system and our capital markets can only thrive when there’s integrity in financial reporting. The PCAOB plays a vital role in that.

The PCAOB’s budget is not paid for by taxpayers. It is paid for by market participants, who benefit from the PCAOB’s work. This essential work facilitates access to capital and builds investor trust in our capital markets.

In recruiting a skilled workforce to carry out its statutory mission, the PCAOB, like any other private-sector employer, vies for high caliber talent in a very competitive labor market. More than three quarters of the $35 million increase from the previous fiscal year’s budget is attributable to personnel costs – for salary, benefits adjustments, and headcount increases.

The PCAOB’s FY 2024 budget also includes an increase of 20 positions, including 10 in the Division of Registration and Inspections (DRI). To put this in historical context, this increase would restore the total number of DRI staff back to an amount comparable to the PCAOB’s FY 2016 and FY 2017 budgets.

Inspecting registered audit firms represents one of the PCAOB’s most important, core investor protection activities. In 2022, the PCAOB inspected roughly 157 audit firms and conducted 710 audit engagements in over 30 jurisdictions around the world. Thanks to Congress’ enactment of the Holding Foreign Companies Accountable Act, this included, for the first time ever, China and Hong Kong.

The PCAOB’s strategic plan includes continuing to perform robust inspections and providing timely inspection reports, as well as increasing transparency in reporting inspection results.

This is especially important in light of a concerning trend towards year-over-year increases in significant audit deficiencies. The deficiency rate for the 2022 inspection cycle is expected to be 40 percent, up from 34 percent in 2021 and 29 percent in 2020.

Another PCAOB staff report found that, in 2022, 42 percent of firms inspected had quality control deficiencies, up from 37 percent in 2020.

The budget we are considering today advances the PCAOB’s core responsibilities and strategic vision and is informed by the results of recent audit inspections.

Protecting investors and advancing the public interest is a permanent project that requires sustained effort and a long-term commitment. This budget offers a well-reasoned approach that fulfills that commitment, as well as the PCAOB’s important mission on behalf of the investing public.

I am very pleased to support it and thank Board Chair Erica Williams for her leadership and PCAOB board members for their unanimous support.