Taking Action to Lead Our Profession and Build Trust in the Capital Markets

When I was attending Babson College 35 years ago, an accounting professor asked me to consider public accounting. My professor explained to me that the profession was focused on protecting the public interest — that this is where the “P” in CPA comes from. I took his advice and began my career in 1988. I’ve now been an auditor for 35 years. I entered this career — and stayed in it — because of my deep belief that accounting can help protect the capital markets, for today's and tomorrow’s investors.

But, why does it matter? Valued at $44 trillion, the US equity markets are the largest in the world. It is where many people have invested, saving for their first home, for a well-deserved retirement, for their children’s college education. No matter your profession, shareholders want to know that the information flowing through the markets is trustworthy. There is a large ecosystem that helps protect the capital markets, and as public accountants, we are proud to be a part of that ecosystem. Enabling financial integrity for “the every person” is the honor of our profession.

I have witnessed significant milestones like the introduction of Sarbanes-Oxley more than 20 years ago, which made our capital markets more robust. And I sat in our clients’ boardrooms during the 2008 financial crisis when I was an audit partner with the overall responsibility for audits — including signing the audit report at the conclusion of the audit. These experiences have taught me about resiliency and the value of integrity.?

Two years ago, we rolled out our new global strategy, The New Equation. We did that because we know the business community is navigating ever-changing headwinds — inflation, rising interest rates, fluctuating consumer demand, supply chain disruptions, rapidly advancing technologies, geopolitical tensions, new regulations and more. In fact, according to our latest CEO survey, nearly 40% of CEOs don’t believe their organizations will be economically viable in 10 years if they do not transform. We also see the rise of companies including non-financial information in their financial statements, making the evolution of reporting and the larger profession even more critical to building trust and driving transparency.?

These changing factors are driving a more complicated business environment, and that is why — after carefully studying the forces influencing the capital markets — PwC US is proactively announcing a significant investment focused on a set of 12 actions to help us further drive the quality and confidence in the information that drives the capital markets, enhance the relevance of the profession, and most importantly, continue to build trust with our clients and our stakeholders.?

With that, the next stage of our firm’s US strategy is focused on two fundamental goals:

1. Taking action to lead our profession

We will proactively take actions across five key areas — accountability, quality, independence, transparency and engagement — and we will begin implementing them over the next three years:

Accountability

1) Leadership certifications — Annually provide public certifications by senior firm management regarding the effectiveness of the firm-level system of quality controls.

2) Compensation at risk — Develop and disclose compensation at risk provisions for firm leadership.

Quality

3) + 4) Fraud and going concern — Enhance procedures related to fraud and going concern, providing the audit team access to a full bench of specialists from across our firm.

5) Additional firmwide training — Conduct additional firm-wide annual training on public interest and the role of the CPA in the capital markets, ethics, independence and objectivity, and fraud/going concern procedures.

6) Enhanced audit report — Enhance the value of the audit report by expanding the content to cover a broader range of topics of interest to investors. Engage with stakeholders to seek additional input on enhancing the value of the audit report.

7) Audit committee representation letter — Seek an audit representation-type letter from the audit committee chair, addressing matters of governance related to the audit engagement.

Independence

8) Consulting services — Cease the provision of certain types of permitted “pure” consulting services that would typically fall under the "other" category in the proxy statement for our SEC-registered audit clients. We are not changing our approach to other types of permissible services that typically fall within the audit, audit-related or tax buckets of the proxy statement.

Transparency

9) Enhanced audit quality report — Publish annually an enhanced audit quality report, including additional KPIs, as well as new conflicts of interest reporting.

Engagement

10) Talent — Commit one million hours for a multi-year campaign to raise awareness of careers in accounting/auditing.

11) Investor center — Establish an investor center for investor advocacy and host an annual investor day.

12) Audit committee institute — Establish an institute to provide training on our role as independent accountants.?

These actions are also about engaging differently going forward. These 12 actions are just the start. We plan to continue listening to our clients, investors, and broader stakeholders in order to be proactive and continue to build trust and confidence.?

2. Expanding our technology platforms to power PwC’s audit capabilities

We are continuing to bolster technology across the audit by investing more than $1 billion US and globally into an innovative new audit ecosystem across our network. This effort is already underway, and includes a first-of-its-kind relationship with Microsoft to leverage the latest cognitive technologies, such as AI, for our global audit platform to help standardize, simplify and automate our audit work. Through this multi-year, tech-enabled transformation, we will redefine how our audit is executed and experienced, while delivering enhanced quality and efficiency — and further build on our commitment to be a human-led, tech-powered organization in the US and around the world.

We are proactively taking these steps because we believe so strongly that they are important to enhance confidence in our profession and provide insight beyond the established expectations of an auditor — now and for decades to come. At PwC, our purpose is to build trust in society and solve important problems. And it’s clear to me that for our teams to continue fulfilling that purpose, our profession needs to evolve. Just like when I first became an auditor, I believe — and always will — that the actions we take go well beyond our profession and clients. As the markets and business environment continue to change, it’s our responsibility to adjust to continue playing our part in safeguarding the capital markets.