Hey the news is slow, let’s look at the PCAOB’s fiscal 2024 budget that the Board approved on November 16. TL;DR the budget is $384.7 million, an 11 percent increase over 2023, and provides funding for 946 positions. Costs appear below:
Said the PCAOB:
The 2024 budget reflects the resources expected to be required in 2024 for the PCAOB to carry out its statutorily mandated responsibilities under the Sarbanes-Oxley Act and achieve the goals and objectives as set forth in its 2022-2026 Strategic Plan approved by the Board last year.
The strategic plan is built around four key goals to help the PCAOB fulfill its investor-protection mission:
- Modernizing Standards,
- Enhancing Inspections,
- Strengthening Enforcement, and
- Improving Organizational Effectiveness.
Before you get bent out of shape over the increase, know that as of November 14, 2023, total fines imposed by the PCAOB have reached $11.9 million for the year. That’s a new record for them (beating last year’s record of $11 million) and the year isn’t even over yet. “Penalties are already more than double the total penalties in each of the five years before the record-breaking year in 2022,” wrote the PCAOB in an overtly self-fellating news release.
They also bragged:
In 2023, the PCAOB has also notched several enforcement firsts, including requiring the first-ever changes to a firm’s supervisory structure, imposing the PCAOB’s largest-ever fine on an audit firm that is not a member of a global network, and imposing the PCAOB’s first-ever sanctions related to a firm’s membership in an accounting alliance.
The alliance one was kinda funny:
To be fair, many of those penalties they’re boasting about were the result of relentless, petty nitpicking and audit quality is in the toilet. Chair Williams wrote a venomous op-ed in Wall Street Journal over the summer that called a 40 percent deficiency rate “unacceptable” two if not three times throughout the piece. And here’s a good example of nitpicking: the PCAOB recently fined a Canadian audit firm $175,000 for using the work of two firms not registered with the PCAOB though neither the clients nor the firms involved were in the US (though the fined firm is registered with the PCAOB). But surely we all feel safer knowing the PCAOB is on the case.
Anyway, here are some more salary totals (in thousands, like it says right there in small print):
The PCAOB’s budget is subject to approval by the SEC and don’t expect resident SEC contrarian Hester Peirce to rubber stamp this increase without much griping. Here she is griping about the 12.6% budget increase for 2023 in a statement released just before Christmas last year:
The ongoing ballooning of the PCAOB’s budget and associated accounting support fee is not a trivial matter. The accounting support fee adds to the cost of being a public company or an SEC-registered broker-dealer. As former SEC Commissioner Michael Piwowar explained:
The accounting support fee is a tax . . . assessed by a non-profit corporation under authority granted by Congress. The Commission represents the only safeguard to an otherwise unilateral ability to impose the accounting support fee tax on companies and broker-dealers. Companies and broker dealers are required, under penalty of law, to pay money to the Board for the privilege of merely existing. These costs are not ultimately borne by companies and broker-dealers, but rather their shareholders and customers.[21]
The PCAOB budget process is a clunky accountability tool, one ill-suited to assess the appropriateness of a tax that now tops $300 million. As the PCAOB’s budget and the accounting support fee continue to creep higher, a structure that would afford Congress more direct oversight of the audit regulator could enhance its efficacy and accountability.
“PCAOB’s Ballooning Budget,” statement by SEC Commissioner Hester M. Peirce on December 23, 2022
“Our strategic plan has been instrumental as the PCAOB has renewed and strengthened its focus on protecting investors,” said PCAOB Chair Erica Y. Williams of the new budget. “With the approval of our 2024 budget, the PCAOB is poised to continue delivering results for investors and the U.S. capital markets.”
