PCAOB amends auditing standards to strengthen requirements

By Kevin Brewer

The PCAOB on Tuesday adopted amendments to its auditing standards to strengthen requirements that apply to audits involving multiple firms.

The amendments are designed to improve the quality of audits in which other accounting firms or individual accountants perform important work on the audit. The amendments were supplemented by three comment solicitations, according to the PCAOB.

"Today, after an extensive process of analysis and public input regarding the lead auditor's use of other auditors, the Board is taking action to improve audit quality and strengthen investor protection," PCAOB chair Erica Y. Williams said in a news release. "These amendments will require audit firms to ensure that lead auditors sufficiently plan, supervise, and evaluate the work of other auditors."

Working with other auditors can differ from working with people in the same firm, creating challenges in coordination and communication, the PCAOB release said. "These challenges can lead to misunderstandings about the nature, timing, and extent of the other auditors' work and can reduce audit quality," the news release said.

The PCAOB said that the amendments, which include changes to existing standards and adoption of a new standard (AS 1206, Dividing Responsibility for the Audit With Another Accounting Firm), improve PCAOB standards principally by:

  • Specifying certain procedures for the lead auditor to perform when planning and supervising an audit that involves other auditors; and
  • Applying a risk-based supervisory approach to the lead auditor's oversight of other auditors for whose work the lead auditor assumes responsibility.

"We look forward to monitoring the implementation and impact of these improvements to our standards as we evaluate whether our objectives in this area are fulfilled," Williams said.

The amendments apply to all audits conducted under PCAOB standards. Subject to approval by the SEC, the amendments will take effect for audits of financial statements for fiscal years ending on or after Dec. 15, 2024.

More information on the project can be found on the PCAOB's standard-setting project page.

— To comment on this article or to suggest an idea for another article, contact Kevin Brewer at Kevin.Brewer@aicpa-cima.com.

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