With a proposal to end PCAOB currently being mulled in the House of Representatives, the board's Chair Erica Williams is on the defensive.
In Williams' May 1 speech at Baruch College’s 23rd Annual Financial Reporting Conference, she expressed concerns about the efforts to fold the PCAOB into the Securities and Exchange Commission. "I am deeply troubled by legislation passed by the House Financial Services Committee that proposes to eliminate the PCAOB as we know it," she said, warning that "the integrity of our markets is not inevitable. It takes vigilance to guard against negligence, recklessness and fraud that threaten our system and the people who depend on it."
Williams said that the stakes are much higher now. She explained that, at its peak in August 2000, Enron had a market capitalization of approximately $70 billion. It was ranked as the seventh largest U.S. publicly-traded firm, and had more than 20,000 workers. Since then, the value of the stock market as well as the values of the biggest and most widely-held firms in America have increased considerably.
As of Mar. 31, the 10 largest firms together had a market cap of $17.4 trillion and employed millions of people, making Enron look small by comparison, Williams said.
Additionally, Americans investments are significantly more vulnerable now with millions of them in the stock market, including through their 401(k)s and the pensions that they have worked their entire lives for. Williams warned that "auditors must perform their audits with more care than ever."
"The integrity of our markets is not inevitable," Williams said. "It takes vigilance to guard against negligence, recklessness and fraud that threaten our system and the people who depend on it." She added that the PCAOB plays a key role in that effort.
Williams cited Senator Paul Sarbanes, who coauthored the law that created the PCAOB. Sarbanes warned of complacency. “When things get better,” he noted “companies tend to forget what happened or how serious it was at the time. Trying to maintain high standards is a difficult job,” Sarbanes warned.
Williams said that, over the past 20 years, the PCAOB has proven itself up to the task. "Under the current Board, we have worked to build on the PCAOB’s strong legacy of protecting investors, setting four strategic goals to further advance the PCAOB’s mission," she noted.
The four cornerstones of the board's mission are: modernizing its standards, enhancing its inspections, strengthening its enforcement and improving its organizational effectiveness.