Good morning. This is an open meeting of the U.S. Securities and Exchange Commission on January 11, 2012.
Today, the Commission will consider the proposed 2012 budget and accounting support fee for the Public Company Accounting Oversight Board. Under the Sarbanes-Oxley Act, which created the PCAOB, the Commission must annually review and approve the Board´s budget and support fee.
And while it our responsibility to ask questions about the appropriate funding level and the stewardship of those funds, there is little question that the PCAOB has grown into an important regulatory body with a significant investor protection role. Since its creation in 2002, the PCAOB has been empowered with the authority to oversee the audits and auditors of public companies´ financial statements — a role that is essential to investor confidence and the success of our capital markets.
And, more recently, the Dodd-Frank Act expanded the PCAOB´s role — vesting it with the express authority to oversee the audits and auditors of broker-dealer financial statements as well.
As we know, the PCAOB improves the quality of audits by developing and maintaining high quality standards for audit performance, conducting and reporting on inspections of audits, and carrying out enforcement actions.
When the PCAOB was established, it represented an unprecedented change in the oversight of the audit profession. Investors were no longer left to rely on a "peer review” system where one auditor reviewed the work of another. Rather, inspections were to be conducted by professionals free from potential conflict, and the results of those inspections were to be made public.
The increased credibility and objectivity inherent in this model speaks for itself. If you compare the findings of an old peer review report with a PCAOB inspection report, you would be struck by the nature and extent of investor protection and professional quality areas identified by the Board.
Likewise, the standards governing audit performance — including how an audit is to be performed by an independent and objective party — are now set by the PCAOB, rather than the auditing profession.
Given its responsibilities and the vital protections it provides to the investment community, the PCAOB must continuously re-examine the results of its standard setting, inspection, and enforcement efforts, and we at the SEC must do the same in our oversight capacity.
To do its job — and do it right — the PCAOB must have sufficient resources, and this review and approval process will give the Board a chance to justify its budget request. In turn, we at the SEC can carry out our responsibility by critically evaluating and ensuring the appropriate funding levels, and probing whether the funds that are collected from issuers and broker-dealers are used efficiently and effectively.
With us here today is Jim Doty, Chairman of the PCAOB. I would like to thank Chairman Doty for being here today and for his leadership of the Board during this past year. I would also like to thank the other Board members as well as the staff at the PCAOB and the SEC, especially Brian Croteau, Jeff Minton, Amy Hargrett, Annemarie Ettinger, and Kevin Stout in OCA and Jamey McNamara in OFM who worked on the preparation and review of the PCAOB´s 2012 budget.
I will now turn this meeting over to Jim Kroeker, the SEC´s Chief Accountant.