The SEC has approved the PCAOB's updated standards for public company audits involving multiple firms, clearing the way for the new rules to take effect for financial statement audits for fiscal years ending on or after Dec. 15, 2024.
The PCAOB released the new standards in June.
SEC Chair Gary Gensler issued a statement while announcing the approval of AS 1206, Dividing Responsibility for the Audit With Another Accounting Firm. With 68% of Fortune 500 issuer audits and 26% of all public company audits in 2021 using multiple auditing firms for their financial statements, Gensler said he was pleased to see stronger requirements established for lead auditors.
"Over the years, the growing complexity and international operations of public companies has led auditors increasingly to rely on other auditors — working across different firms, countries, and even languages — in completing an audit," Gensler said in the statement. "Given the challenges that such multi-firm audits present, it is important that there be robust standards for how lead auditors supervise, communicate with, and coordinate with other auditors on the audit engagement."
Gensler said the added standards will improve audit quality and investor protection by specifying procedures for those supervising multi-firm audits, including requirements that instruct lead auditors to prioritize their activities around high-risk areas.
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