PCAOB proposal would expand auditors' responsibilities

We summarize the amendments to auditing standards proposed by the Public Company Accounting Oversight Board (PCAOB) that would require auditors to identify a company’s noncompliance with laws and regulations. We’ve summarized significant changes and potential impacts for both auditors and management.

Applicability

Proposed amendments to auditing standards

• Public companies

Relevant dates

• June 6, 2023 – The PCAOB released proposal
• August 7, 2023 – Comments due

Key impacts

The PCAOB is seeking public comment on extensive changes proposed to auditing standards related to auditors’ responsibilities over a company’s noncompliance with laws and regulations (NOCLAR), including:

• identifying laws and regulations with which noncompliance could reasonably have a material effect on the financial statements
• assessing the risks of material misstatement of the financial statements due to noncompliance with those laws and regulations, and responding appropriately
• identifying whether there are instances of NOCLAR that have or may have occurred
• evaluating those NOCLAR instances and communicating to appropriate parties, regardless of perceived materiality

Report contents

• Introduction
• Summary of significant changes and potential impacts
• Amendments to other PCAOB auditing standards
• Potential impacts to management
• Economic analysis