- The Public Company Accounting Oversight Board on Tuesday proposed an update of “foundational” audit standards and a requirement that the deadline for filing final documentation after completion of an audit be trimmed to 14 days from 45 days.
- Shortening the completion date “would enable the PCAOB to potentially begin our inspection process sooner,” PCAOB Chair Erica Williams said during the webcast of a board meeting. “This would lead to a waterfall effect that ultimately would provide the opportunity for us to get our inspection reports to investors sooner, enhancing their protection.”
- The PCAOB proposal unifies into a single standard several interim audit rules created two decades ago that are focused on ensuring professional skepticism, independence, competence and judgment, with particular attention to the engagement partner’s responsibilities. The board requested public comment on the proposal by May 30.
The PCAOB has sharpened enforcement of audit standards since Gary Gensler, after assuming the post as chair of the Securities and Exchange Commission in April 2021, replaced board leadership and called on it to strengthen oversight of the accounting firms that audit publicly listed companies. Williams was sworn in as chair in January 2022.
“Our capital markets never stop evolving, and it’s important for PCAOB standards to keep up so that investors are protected,” Williams said.
The new standard would combine four interim rules created 20 years ago by the American Institute of Certified Public Accountants that focus on auditor responsibilities, independence, training and “professional care,” the PCAOB said.
Merging “foundational standards into one standard would reaffirm the general principles and responsibilities of the auditor and solidify the foundation of every audit, leading to investor protection and informative, accurate and independent audit reports,” Williams said.
Advances in audit software and other technology have made feasible the reduction in the filing deadline to 14 days, the PCAOB said.
The current 45-day deadline was created when auditors primarily used paper, rather than electronic, documentation. The PCAOB does not begin vetting an audit until an accounting firm has filed complete and final documentation.
The proposed PCAOB changes affirm the engagement partner’s primary responsibility for supervision, review and overall quality, and for ensuring that the audit is completed as planned.
“Available evidence, including observations from our regulatory activities, indicates that audit engagement partners may be falling short in certain aspects of their supervision of the audit,” Dylan Rassier, senior financial economist at the PCAOB, said during the webcast.
The interim audit standards created in 2003 do not align with new revised PCAOB rules, new or revised independence requirements and advances in technology such as audit software and the availability of electronic audit evidence, the PCAOB said.