By Jason Bramwell, Staff Writer
The budget is $12.8 million, or 5 percent, higher than the board's 2013 budget of $245.6 million. The strategic plan for 2013-2017 serves as the foundation for the budget, guiding the PCAOB's programs and operations.
"The $258 million budget supports the strategic plan and properly reflects the board's funding needs to maintain quality programs, effective oversight, and dedicated people as we seek to fulfill the board's investor protection mission," PCAOB Chairman James Doty said in a written statement.
The chairman said one of the most significant elements of the board's budget and related strategic plan is the use of economic analysis. While the PCAOB has used economists in its Office of Research and Analysis for many years, the board hired John Powers, PhD, as its first economist in the Office of the Chief Auditor this past May.
"We plan to hire additional economists to work with him, to embed economic thought and tools in the standard-setting process, from the early development of ideas and alternatives to solve problems in audit practice, through the stages of soliciting public comment and preparing a new standard," Doty stated
during the meeting. "These economists will also work closely with economists in our Office of Research and Analysis, who can provide a fresh review of the economic effects of the standards."
"Under Professor Zingales' expert leadership, we plan to attract other top economists to work in the center to advise us on how economic theory, analysis, and tools can enhance the effectiveness of PCAOB programs," Doty noted. "In addition, we hope to spur research on the role of the audit in capital formation and investor protection."
Board member Jay Hanson said he is a strong supporter of economic analysis in financial regulation and applauded PCAOB staff's progress in this area.
"Already, I have learned a great deal from our economists, and I believe that the PCAOB's regulatory activities will be stronger and better tailored to relevant problems as a result of their involvement," he stated
during the meeting. "The Center for Economic Analysis should provide a strong basis for the ongoing development of our economic analysis framework and tools. That said, I believe that we need to take care in implementing this new function to provide the appropriate focus for the center and to ensure close coordination with the existing offices and divisions of the PCAOB to avoid overlap in their efforts or miscommunications about roles."
Looking forward, Doty said he hopes the PCAOB's proposal to change the auditor's reporting model
will "engage the public in a broad and constructive debate about the role of the audit fostering broader and cheaper access to capital for businesses and entrepreneurs."
The strategic plan also highlights the PCAOB's initiative to develop audit quality indicators
that focus not only on financial statement audit quality measures at the firm level, but also at the engagement level, according to board member Steven Harris.
"Developing such indicators should allow firms to compete first and foremost based on audit quality and should be of value not only to audit firms, but to audit committees, investors, and PCAOB inspectors alike," he stated
during the meeting.
Board member Jeanette Franzel added the audit quality indicator project will continue into 2014, but it is "off to a great start, with significant research, analysis, and outreach that is leading to the development of a concept release."
"In addition, the staff has set a goal of leveraging this work in 2015 to produce a concise summary report on the state of audit quality," she stated
during the meeting. "I am enthusiastic that these efforts will result in new information, insights, and tools that will make a difference in the market for audit services and advance quality auditing for the benefit of the investing public."
The 2014 budget is subject to approval by the US Securities and Exchange Commission (SEC). The SEC's rule on the PCAOB budget requires the PCAOB to maintain a strategic plan.
A summary of the 2014 budget will be available on the PCAOB website once it is submitted to the SEC for consideration. The PCAOB strategic plan also will be available at the same time. Both documents will be available on the Operations web page
under the "About the PCAOB" tab on the website.