Remarks as prepared for delivery

Thank you, Chair Williams.

I fully support adoption of QC 1000 and related amendments. This effort has been a long time coming.

Issuer and broker dealer audits are conducted within the construct of a firm's system of quality control. A robust and effective QC system is, therefore, fundamental to the production of consistent high-quality audits. If we apply the hub and spoke model - the QC system is the hub from which individual engagements, or spokes, emanate. When there is a crack in the hub, the spokes can fail. When QC systems fall short, individual engagements fail and investors are put at risk.

QC 1000 is revolutionary because of how it will help drive improvement in audit quality. Some of the key elements of the standard include:

• Adding requirements around the firm's risk assessment process,
• Emphasizing accountability by assigning roles and responsibilities and incorporating requirements around firm governance and leadership,
• Strengthening the monitoring and remediation process, and
• Requiring a rigorous annual evaluation of the firm's QC system and related reporting to the PCAOB on a new Form QC.

QC 1000 reflects the significant evolution of the auditing environment. Many firms have grown exponentially since 2003 when our interim standards were adopted. In some cases, registered firms are not even primarily audit firms, but professional services firms with aspects of their business that have outpaced the size of their audit practice. Further, as technology evolves within the financial reporting ecosystem and within the conduct of an audit, risks are also evolving. Building in a risk-based framework to the nucleus of this standard is critical to reflect the ever-changing environment, and associated risks, in which registered firms operate.

Balanced against the risk-based framework are requirements related to six components that address aspects of a firm's organization and operations. This includes 1) Governance and leadership, 2) Ethics and independence, 3) Acceptance and continuance of engagements, 4) Engagement performance, 5) Resources, and 6) Information and communication.

All six of these components are critical to a well-functioning QC system. Of particular importance is the strengthening of accountability through the assignment of roles and responsibilities and codifying the importance of the governance and leadership function. Firm leaders drive firm culture and, thereby, influence how engagements are executed. Establishing a healthy tone at the top that promotes continuous improvement in audit quality can enable the effective operation of the QC system.

While governance can promote continuous improvement, it is the monitoring and remediation process that creates the feedback loop to drive action toward such improvement. Recent inspection trends suggest that many firms could benefit from improvements in monitoring and remediation. Timely detection and remediation of engagement deficiencies and QC deficiencies are ultimately in the best interest of investors. It strengthens the trust of auditors across the ecosystem.

QC 1000 requires firms to annually evaluate the effectiveness of their QC system and report the results on Form QC. This nonpublic form will include the firm's overall conclusion on effectiveness, reporting on unremediated QC deficiencies, along with those responsible for the system of quality control. As stated in the release, this "reinforces the responsibility and accountability of leadership for the firm's QC system." I believe that if the firm takes ownership of the evaluation and results, it will be incentivized to own the steps towards continuous improvement. Firms can demonstrate through this process their commitment to improving audit quality. Reporting on Form QC will also establish a rigor in the process that does not currently exist and will benefit our oversight activities.

In addition to the QC 1000 requirements, the rulemaking rescinds our interim ethics and independence standard, and includes the establishment of a new standard, EI 1000, Integrity and Objectivity. We have codified requirements of integrity and objectivity, which are the conscience to guide an auditor. Trust in this profession could erode in the absence of these two foundational pillars.

QC 1000 reflects our commitment to research and outreach. This project has benefited from discussions with our advisory groups, and the comments that we received after issuing a concept release and a proposing release. Importantly, extensive economic analysis has been applied to the standard. In my view, our rules and standards are more impactful when we consider the perspective and insights of a range of stakeholders and apply rigorous economic analyses.

We have seen through our enforcement actions, the poor results of engagements conducted in a fragile system of quality control, whether it is ethical lapses, weak tone at the top, or an inability to effectively monitor and remediate. Investors and other stakeholders are put at risk when individual engagements are not supported by a strong hub, which is the firm's QC system. I believe that QC 1000 strengthens the foundation and furthers our mission to protect investors and further the public interest in the preparation of informative, accurate, and independent audit reports.

I would like to express my appreciation to the PCAOB staff for the years of dedication they have devoted to preparing the recommendation before us today. In particular, I want to thank Barb Vanich, Jessica Watts, Karen Wiedemann, Linnette Klinedinst, Schuyler Simms, Ekaterina Dizna, David Ellam, and Carla Anderson in the Office of the Chief Auditor; Martin Schmalz, John Cook, Nick Galunic, and Dylan Rassier in the Office of Economic and Risk Analysis; and Drew Dropkin, Jennifer Williams, and Connor Raso in the Office of the General Counsel. In preparing this rulemaking, many across the PCAOB have contributed. As such, I also thank individuals from the Division of Registration and Inspections and the Division of Enforcement and Investigation who provided insight from our oversight activities. Thank you to the SEC staff within the Office of the Chief Accountant for their input, as well as my fellow Board Members, their staff, and my staff.