Public Company Auditing – A Profession of Courage

Remarks as prepared for delivery

Thank you for that kind introduction and inviting me to this conference. The views I express today are my own and do not necessarily reflect the views of the Public Company Accounting Oversight Board (PCAOB), other PCAOB Board Members, or PCAOB staff.

Profession of Courage

In my recent speech and podcast interview, I described public company auditing as a profession of courage because it often calls upon auditors to speak the truth against their self-preservation instinct when it is necessary to protect the public interest.¹ Today I would like to discuss in greater depth what that means in practice for public company auditors; specifically, in the context of two critical relationships of management and the regulator. I will also discuss the state of technology innovation in public company audits.

Relationship With Management

In a public company audit, an inherent tension exists in the relationship between management and the auditor. That is by design like the checks and balances in our federal government. Here, both parties have different responsibilities, separate compliance requirements, and separate deadlines. There is both interdependence and accountability. To provide accurate financial reporting that investors can rely on, management and auditors each have separate and distinct roles and responsibilities, but they also rely on each other to function effectively and, to a great extent, hold each other accountable. Auditors help ensure that management’s representation of the company’s financial information is free of material misstatements. Management provides an appropriate check on the auditor that helps ensure that audits are not only effective but also efficient. Getting the right balance is not always easy. Sometimes in audits, there may be pressure from management for auditors to disregard certain discrepancies either due to compressed timelines or in some cases to paint a more favorable financial narrative. Management may have earnings targets, bonus pressures, or other reasons that may drive this behavior. It is the auditors’ duty to resist such pressure and uphold the professional auditing standards to gather sufficient appropriate audit evidence to render the audit opinion.

When it comes to auditors navigating their relationship with management, courage is important at every level. Let’s start at the foundation level, the audit associate and audit senior associate (collectively “audit staff”). Imagine being a newly minted audit associate walking for the first time into a conference room full of management personnel, with your engagement managers or partners conducting interviews of management on various important transactions and processes. Although you quietly observe and diligently take notes, your perspectives are just as important as more seasoned auditors. You may observe body language hinting that something is off or notice inconsistencies when examining evidence to substantiate the information provided during the interviews. I recall when I was an audit associate, I was so scared of speaking up or asking questions because I did not think that I knew enough or I did not want to look foolish if I was wrong. When you are the least experienced member of the engagement team, it takes courage to raise concerns with your engagement managers, to not just accept management’s answer on its surface but to ask “why,” and express professional skepticism by highlighting potential incongruities in management responses in a professional manner. This courage is not about opposition, rather it's about not being naïve and not taking every answer at face value.

As audit associates gain experience and advance to more senior roles as managers and directors (collectively “managers”), you must navigate complex management expectations and sometimes confront the uncomfortable reality that additional audit work is necessary even though time is running out. In these moments, courage could mean remaining steadfast that additional audit procedures are necessary regardless of the consequences of the original audit plan not working out, and to pivot by digging deeper instead of convincing yourself that the work was “good enough” and simply checking the box to complete the audit on time. Being courageous is most difficult at this level, as you are the primary face of the engagement team. In the words of Maya Angelou, an American poet and civil rights activist “Courage is the most important of all the virtues because without courage you can’t practice any other virtue consistently.” As engagement managers, it is imperative that you avoid falling into the pitfall of management pleasing, and it's ever more important to stay courageous consistently. It's about exercising professional skepticism in a thoughtful manner for the benefit of your integrity, the reputation of your firm, investors, and helping ensure that U.S. capital markets remain the largest in the world.²

At the senior leadership level, partners carry the heaviest load of responsibility for ensuring audit quality. This responsibility and the courage that must come with such responsibility is most tested when circumstances warrant challenging management at the possible cost of losing business. It’s the courage to lead by example and create an environment where ethics are not just words in the code of conduct but are applied values, each and every day. In today’s increasingly complex and highly scrutinized business environment, you as partners serve as a source of inspiration to your engagement team members by leading with confidence and cultivating curiosity and professional skepticism through every stage of audit.

Relationship With the Regulator

As you know, regulators have tremendous power and require self-discipline and awareness to mitigate the risk of abusing their power. The PCAOB has a primary mission of investor protection, compared to the three facets of the SEC’s mission to: (1) protect investors; (2) maintain fair, orderly, and efficient markets; and (3) facilitate capital formation. Since these facets are interdependent, they also serve as balancing forces so that the regulators are incentivized to use their regulatory power judiciously. PCAOB lacks such self-balancing forces and has a higher risk of regulatory overreach without proper oversight. Last year, I publicly shared my regulatory vision, which I will briefly summarize.³ First, I believe that regulations should only be adopted when necessary. Second, regulations should be well-designed and in proportion to the problem to be solved. Third, regulations should facilitate trust and innovation. Unfortunately, the PCAOB has sowed distrust in public company audits over the past few years as a result of its regulatory overreach and inexplicable hostility toward the profession. The number of PCAOB registered firms in the U.S. has declined more than 20% since the beginning of 2022.

Under this kind of regulatory climate, it can feel like the hard work that goes into auditing is not valued, which can be discouraging to audit professionals at all levels. In addition, the work is only getting more intense. Firms have five new auditing standards to implement this year alone. It may seem like this is a no-win profession. I implore you not to give up because this is a worthy profession. To put it into perspective, you are inherently protecting investors in the U.S. stock markets that represent approximately $62 trillion in investments (as of July 3, 2025) through your audit work.⁴ Yes, trillion with a T, there is no better way to illustrate how crucial your role is to the capital markets. Providing fair and transparent capital markets for investors to grow their life savings is part of the “secure the Blessings of Liberty to ourselves and our Posterity” mission in the preamble to the Constitution.

It takes courage to continue to do the right thing day in and day out in the face of misunderstanding and hostility. As professional audit staff, you are working long hours and performing many audit procedures that may seem tedious and unexciting. You may also be afraid of making mistakes and possibly receiving an inspection finding on your audit engagements. Shift that fear into courage and ask questions so that your engagement managers can lead you to getting it right.

As managers, you balance budgets and schedules, cultivate working relationships with management, and communicate critical engagement issues to partners, all while ensuring compliance with auditing standards across multiple engagements. You are at the center of getting it right, creating a safe space for more junior audit staff to ask questions, and patiently mentoring them through the pressures of a deadline-driven busy season. Your courage is choosing not to fold, no matter how loud the competing priorities scream.

As senior leaders in the firms, courage is choosing to empower your engagement teams by investing more in training and technology to properly implement new standards and prioritizing the long game over expediency. Auditors may face inconsistent and ever-changing regulatory expectations, where, for example, audit procedures reviewed during previous inspections were deemed sufficient but more recently are deemed deficient, even though the auditing standards at issue have not significantly changed. When appropriate, you as leaders should face such challenges with equanimity but without acquiescence. By doing so, you preserve the dignity of your engagement teams and the audit profession as a whole. When you know the regulator is wrong, it’s having the courage to reject complacency and stand up for your firm and your people to professionally challenge the regulator’s views. This is not about being righteous or confrontational, instead it’s about leading with resolve and setting a strong tone to safeguard your firm’s reputation. The same courage you exercise to stand up to management when pressured to overlook errors or fraud is the same courage you exhibit when your regulator abuses its power.

State of Technology Innovation in Public Company Audits

Now transitioning to technology, we are currently at a crossroad between traditional auditing and the technological transformation of auditing. As you know, auditing is one of the cornerstones of confidence and accountability in our financial system, and the fast evolution of artificial intelligence (AI) offers innovative ways to enhance our processes to improve audit quality. It is imperative that we channel AI in ways that preserve the integrity of the public company auditing profession, while automating and making the audit process more efficient and more reliable. AI technology can boost processes with rapid data ingestion and speedy analysis of all transactions, way faster than our powerful yet limited human brains can. However, AI is evolving at unprecedented speed, and connecting the dots to audit is not an easy effort.

As the audit profession and technology evolves, it is increasingly essential for professionals at all levels to develop fluency in the use of AI. Today’s auditor relies heavily on periodic reviews and labor-intensive sampling of transactions, while tomorrow’s auditor will harness the power of continuous auditing, leveraging dynamic risk assessments and automated workflows to analyze entire populations of data. I believe your role could transcend traditional audits, and you may become an auditor of the AI algorithms themselves.

Unfortunately, the PCAOB as a regulator has done little to enhance audit quality by providing technology-based standards on the responsible use of AI in conducting public company audits. While AI may be a transformative agent, bringing powerful capabilities across industries, professions, and communities, it also introduces ethical challenges and considerations that we face as professionals. For example, algorithm bias, data privacy issues, cybersecurity risks, explainability challenges, and trust in the results are all topics that we, as the regulator, need to assess, yesterday!

I have heard from both preparers and auditors that there is heightened fear over the past 3+ years of the regulatory environment, particularly the concern that the PCAOB is both regulating by inspections and enforcement. Although firms are investing in and exploring AI, its use in public company audits has been constrained by the lack of clear regulatory standards and guidance. To date, we have not provided any guidance on the use of AI in public company audits. Having said that, we cannot effectively write standards in an area where we have limited in-house AI expertise.

So how can we charge ahead? Building on our Technology Innovation Alliance (TIA) Working Group’s efforts, we can take it a step further and seek more granular information on the use of AI in audits. For example, we can publish the TIA recommendations and solicit comments on such recommendations from stakeholders such as audit firms, issuers, technology companies, and academics. Given the speed of AI advancement, we could also begin building an agile and iterative process to rapidly develop AI-related audit standards and/or guidance and pilot test them before adoption. At the end of the day, as the U.S. public company audit regulator, we should facilitate innovation by amplifying the pioneering spirit and collaboratively exploring the AI frontier for the benefit of investors and our capital markets. The adventurous spirit of John Colter, who fearlessly explored the West in the early 1800s, teaches us lessons that can be applied to the modern pursuit of AI enhanced audits. Whether in the wild frontiers or the wild digital domain, the path to innovation is paved by those who have the valor to explore beyond what is known and comfortable, no matter the obstacles that block the way. Be like John Colter, be valiant, explore technology without trepidation, and exhibit resilience to overcome all impediments in the auditing profession today and every day.

Conclusion

It was not my intention to give you a pep talk today. I know it is hard to exercise courage, especially when you feel powerless and feel that your “small” voice does not matter. But take heart as I have been a lone voice myself at the PCAOB over the past few years, and I must admit that it has not been easy. Yet I have received many words of encouragement to continue speaking up and staying the course. Those words of encouragement were helpful to me, and I hope my remarks today will be helpful to you. There is no doubt in my mind: public company auditing is a profession of immense courage. Each of you in this room embodies that courage as heroic auditors entrusted with safeguarding trust in our financial system. You are vital contributors to a legacy that upholds the integrity and honor of the CPA profession. For that, and so much more, I sincerely thank you. I think Winston Churchill, the United Kingdom’s Prime Minister during World War II, said it the best, “Success is not final, failure is not fatal: it is the courage to continue that counts.”

Thank you for your continued contributions to the auditing profession. I’d be happy to address any questions.