Date: Nov. 25, 2014
Speaker: Lewis H. Ferguson, Board Member
Event: PCAOB Open Board Meeting
Location: Washington, DC
I support the PCAOB's 2015 budget, although I am unable to attend in person the open meeting on November 25, 2014 because of a prior commitment. I am pleased to see that this year's budget reflects a small decrease compared with last year's planned spending amount, which suggests that the PCAOB is close to being fully resourced for its mission. Our budgets have generally increased annually since inception in 2003 and I am glad to see that those increases have begun to tail off. The PCAOB continues to face challenges in finding and hiring the highly specialized and in-demand talent that we need to carry out our mission. In 2015, we will be focusing on enhancing our ability to attract and retain the highest quality talent. Although it might seem contradictory on first view, to the extent that the organization is viewed by prospective employees as a valuable step in career progression for auditors and other professionals, I believe we will be in a better position to attract some of the most desirable potential employees. In addition to being a desirable employer for long-term employees, as a sophisticated employer carrying out an important mission, if we provide excellent training and a broad experience to our professionals, we should expect them to also become desirable hires for others. I have been encouraged to see a number of our employees this quarter being recruited for opportunities elsewhere in public service, with regulated auditors, and with issuers. While this poses difficulties for us in keeping our workforce fully staffed in the short run, I believe that over time such opportunities for our staff will allow us to attract the most qualified applicants and to be perceived in the job market as a particularly desirable place to work.
This year's budget also includes increased funding for a new initiative, the Center for Economic Analysis, that was commenced in 2014 and that aims, among other things, to build our capacity to bring sophisticated, academic and other resources to bear on economic analysis. This year, the Center was able to hire the first two academic fellows who will conduct research using the PCAOB's proprietary data bases. It also began an inventory of the various data resources housed within the PCAOB, and convened an academic conference of more than one hundred participants, at which a number of papers examining issues relevant to auditors and audit oversight were presented and discussed. I support the concept behind and the mission of the Center, but I believe that, at least in its initial stages, the Center needs to be closely monitored by the Board to assure that its mission and activities remain consistent with the overall mission of the PCAOB. For example, the 2015 budget proposes expenditures for the Center that are triple the amount actually expended by the Center in 2014 and proposes an increase in headcount from 6 to 13, including two new economists to work on standard setting. In approving the preliminary budget, the Board insisted that future research fellows and the topics of their research need to be approved in advance by the Board, and I believe that the Board needs to be closely involved in overseeing and approving the proposed expansion of the Center.
In order to facilitate the economic analysis that we are applying to our standard setting activities, and more generally to a number of our areas of activity, we have hired a number of economists. The PCAOB's economists are now spread among the Office of Research and Analysis, the Office of the Chief Auditor, and the Center for Economic Analysis. I believe that the dispersion of the economists throughout the organization in this fashion may raise questions of coordination and supervision and that the Board must vigilant to insure that the program's design is best suited to meet our objectives of strong economic analysis and that there is not duplication of effort or unproductive conflicting analysis and views.
With these caveats, I support the 2015 Budget and believe that it provides an appropriate level of resources to achieve the Board's mission and its ongoing activities. I thank the PCAOB and SEC staff for their diligent efforts in preparing these materials.