The Securities and Exchange Commission approved a reduced 2015 budget for the Public Company Accounting Oversight Board with a charge to get busy on setting important professional standards and whipping broker-dealer auditors in particular into shape.
The PCAOB’s 2015 budget of $250.9 million is 3 percent less than its 2014 budget, but 8 percent more than the board actually spent in 2014, said the SEC. The PCAOB has found it tough to fill all of its professional staff positions in a tight job market for audit talent, leading to a reduced headcount from its projections.
The budget reduction also means a reduction in the support fee that companies and broker-dealers pay to provide the PCAOB with its funding. The 2015 accounting support fee of $226.6 million is about 10 percent lower than the 2014 fee, the SEC said, with $199.1 million of he fee assessed to public companies.
PCAOB Chairman James Doty said during the SEC hearing to consider the budget that the decrease “reflects an appropriate reassessment of assumptions relating to personnel and other costs.” The PCAOB is projecting an approximate staff headcount of 815 by the the end of 2015, he said. “This projection is based on a more conservative assessment of our ability to hire in today's fairly competitive market for experienced professionals,” he said. The board will still achieve its objectives, he added.
That includes making more progress on inspections and on professional standards that have been on the board’s agenda for some time, points SEC Chair Mary Jo White raised with Doty. One of the PCAOB’s highest priorities is to inspect audit firms, White said, who added she was encouraged to see the PCAOB heeded her advice a year earlier to expand its interim inspection program for broker-dealer audits. The PCAOB’s reports so far have indicated room for significant improvement in those audits. “I expect the PCAOB to continue to apply its full complement of standard setting, inspection, enforcement, outreach, and other resources to this issue,” she said.
In addition, White urged the PCAOB to “enhance the urgency and prioritization of standard setting,” a point SEC Chief Accountant James Schnurr also urged the PCAOB to address shortly after he assumed his post in 2014. White called out some specific standards, such as on quality control, auditing accounting estimates, including fair value, auditors’ responsibilities with respect other firms, auditors’ use of specialists, and going concern.
“These projects, which have been on the PCAOB’s agenda for a number of years, address important areas where clear and robust auditing and quality control standards are needed,” she said. “I also understand that the Board will engage in an evaluation of ways it can improve its standard setting processes. I applaud this effort. It is a very important undertaking and I look forward to seeing the results.”
Doty told the SEC he has been meeting with Schnurr to discuss the standard setting process. “We are exploring potential ways to make the standard setting process more efficient,” he said. “It is a rulemaking process. There are a lot of perspectives, interests, and effects that have to be considered. But I agree that the process can be improved. Our chief auditor and I are committed to seeking ways to make it more efficient.”
Doty also hinted the board expects to devote more resources to address “potential audit failures in cross-jurisdictional audits” in 2015. “In 2014, we stepped up international enforcement activity,” he said. “We have several pending investigations and proceedings involving work by foreign registered accounting firms. I expect more of our resources than in years past will have to be targeted to international enforcement activity.”