PCAOB Board members spoke on the first day of the Conference. They highlighted a number of key projects on their ambitious standard-setting agenda, as well as enhancements to their reporting on inspections and the strengthening of their enforcement activities. The importance of trust in the capital markets, driving audit quality improvements and stakeholder engagement were other themes throughout the Board’s panel.
Through the use of their advisory groups, spotlights and other targeted publications, plus requests for public comment, the PCAOB delivered a call to action for stakeholders to engage in meaningful dialogue with the Board on its activities.
"Maintaining trust in the audit profession is essential to meeting investor expectations. Audit firm integrity is the foundation for high-quality audits and supports investor confidence in the capital markets. We support the PCAOB’s focus on understanding investor expectations and responding accordingly. Integrity is at the heart of our firm’s culture and central to our core values. "
— Doug Besch, KPMG Chief Auditor
Auditors’ gatekeeper function highlighted repeatedly
An auditor’s role in maintaining trust and confidence in the capital markets in the gatekeeper function – and the related shared responsibility of the audit committee, management and others in the financial reporting ecosystem – was a highlight throughout the PCAOB Board’s discussion. This entails a laser focus on audit quality executed within a strong system of quality control.
The PCAOB has focused on modernizing its standards as one of its key strategic priorities to keep the focus on the auditor’s expectation of acting in the public interest. To that end, the PCAOB has undertaken more standard-setting and rulemaking activities in 2023 than any other year in the last ten years. The pace does not seem to be slowing as we head toward 2024. We expect the PCAOB to adopt four final new or amended auditing standards and to propose an additional four new or amended auditing standards and two rulemakings this coming year.
PCAOB Chief Auditor Barbara Vanich is scheduled to take a deeper dive into the Board’s standard-setting activities on Day 2 of the Conference. The Board’s Day 1 discussion centered on its fundamental investor protection objective – with a central theme across the PCAOB’s standard-setting activities to support increasing audit quality and aligning auditor responsibilities with expanding investor expectations.
Noncompliance with laws and regulations (NOCLAR)
The Board emphasized the proposed requirements for auditors to strengthen the identification, evaluation and communication of information that may indicate a company's noncompliance with laws and regulations.
Read more about the proposal here.
Read more about the proposal here.
The Board highlighted the new PCAOB standard for the auditor’s use of confirmations that was approved by the SEC on December 1. The new standard is a step forward in the Board’s strategic goal of modernizing the PCAOB standards and will be effective for audits of financial statements for fiscal years ending on or after June 15, 2025.
Read more about the standard here.
Digital transformation a key driver for the PCAOB
Noting that technology advances constantly, Christina Ho, PCAOB Board member, highlighted how the PCAOB considers the impact of technology innovations and how it informs its standard-setting activities.
With the data and technology research agenda topic, the Board's engagement with the Technology Innovation Alliance Working Group, and the influence of the impact of technology on several standard-setting projects, the PCAOB is considering the role that technology innovation plays in driving audit quality. Board Members Anthony Thompson and Ho also highlighted the expanded use of technology in audits as a way to mitigate the current talent pipeline challenges.
Enforcement is a key tool
The PCAOB uses enforcement as a key tool in investor protection and a deterrence for wrongdoing. The PCAOB has remained focused and vigilant in strengthening its investigations and enforcement actions throughout 2023 – imposing the highest penalties in PCAOB history. Additionally, enforcement is expanding in terms of the cases identified and the types of cases being pursued.