PCAOB seeks feedback on changes in quality control standard for auditors
The Public Company Accounting Oversight Board released a YouTube video Monday discussing how to comment on its recent concept release on potentially revising quality control standards for audit firms.
The concept release, published last month, asks for public comment to tell the PCAOB about what kinds of changes it should propose in the future to strengthen its requirements for audit firms' quality control systems. The changes would represent the biggest changes since the PCAOB adopted the current quality control standards in 2003 after the board was established by the Sarbanes-Oxley Act of 2002, in the wake of accounting scandals like Enron and WorldCom. However, the auditing environment has changed a great deal since that time, especially with more widespread adoption of technology to automate the audit process and use of data analytics.
The PCAOB is asking for comments on the concept release by March 16.
“An audit firm’s quality control system is a vital element of supporting the performance of high-quality audits,” said Erin Dwyer, the PCAOB’s deputy director of external affairs and stakeholder liaison. “For that reason, we hope investors, audit committees and preparers will review our release and participate in the comment process.”
Comments can be emailed to firstname.lastname@example.org or they can be sent by mail to the Office of the Secretary at the PCAOB, 1116 K Street, NW, Washington, D.C. 20006-2803.
The PCAOB believes that requiring firms to establish effective systems of quality control is foundational to promoting consistent performance of high-quality audits to help prevent, detect and ameliorate deficiencies, but the auditing environment has changed considerably since the existing quality control standards were created 17 years ago (see PCAOB proposes changes in quality control standards). There have been considerable changes in auditing technology and firm governance and leadership since that time.
“It’s worth noting that we are not addressing this issue in a vacuum,” said Dwyer. “The International Auditing and Assurance Standards Board, also known as IAASB, recently proposed updates to its analogous quality control standards. Due to the foundational nature of QC systems, we believe that it would not be practical to require firms to comply with fundamentally different quality control standards.”
The PCAOB is considering using the IAASB’s proposal as a starting point as it considers its approach to a new quality control standard. The PCAOB is hoping to avoid unnecessary differences between its standard and the international standard, but anticipates there probably will be some minor incremental or alternative requirements. Another goal of the PCAOB is to take more of a risk-based approach in its quality control framework.
Comments on the proposal can be long or short, and commenters can respond to some or all of the questions in the concept release. The PCAOB plans to review all of the comments it reviews. The comments will all be posted to the PCAOB’s public website.