The PCAOB proposed giving guidance for lead auditors supervising audit work performed by other firms and individuals in multifirm audits.
PCAOB oversight data indicate that "other auditors" are involved in about 55% of audits performed by U.S. global network firms and about 30% of audits performed by non-U.S. global network firms.
Other auditors may have different business practices, cultural norms, languages, and quality-control systems from the lead auditor. These factors can complicate the communication and coordination between the lead auditor and other auditors.
The PCAOB's exposure draft proposes responsibilities for the lead auditor for planning, supervising, and evaluating the work of other auditors. The proposal would direct the lead auditor's supervisory responsibilities to the areas of greatest risk. The proposal also would make it clear that an audit firm must itself audit a meaningful portion of the financial statements to act as lead auditor.
In addition, the proposal would require more-explicit procedures to prompt the lead auditor to bolster its involvement in the work of other auditors through effective communication and thorough evaluation of other auditors' qualifications and work.
The proposal will be made available at the board's website, where comments can be submitted through July 29. The affected standards are Auditing Standard (AS) 1201, Supervision of the Audit Engagement; AS 2101, Audit Planning; AS 1215, Audit Documentation; and AS 1220, Engagement Quality Review.
The PCAOB also is proposing a new standard, AS 1206, Dividing Responsibility for the Audit With Another Accounting Firm. The new standard would retain, with modifications, many of the requirements of current AS 1205, including the requirement that a lead auditor disclose in the audit report which portion of the financial statements was audited by each other auditor, while instituting several new requirements for lead auditors.