SEC approves PCAOB system of quality control

The SEC approved a PCAOB standard that establishes a risk-based quality control system for public accounting firms.

The PCAOB adopted QC 1000, A Firm’s System of Quality Control, on May 13, pending SEC approval. QC 1000 and related amendments will take effect Dec. 15, 2025.

QC 1000 largely aligns with AICPA quality management standards that take effect on the same day, as well as with International Auditing and Assurance Standards Board (IAASB) standards that became effective in December 2022.

The SEC approval comes three weeks after the commission approved another major PCAOB initiative. AS 1000, General Responsibilities of the Auditor in Conducting an Audit, updates and consolidates standards provided by the AICPA that the PCAOB at the time of its formation adopted for interim use in 2003. AS 1000 will take effect for audits of financial statements beginning on or after Dec. 15, 2024 (or Dec. 15, 2025, for firms that provide audit opinions for 100 or fewer issuers during the 2024 calendar year).

Also, the SEC approved PCAOB amendments to AS 1105, Audit Evidence; AS 2301, The Auditor’s Response to the Risks of Material Misstatement; and Rule 3502, Responsibility Not to Knowingly or Recklessly Contribute to Violations.

SEC issues resources for small businesses

The SEC’s Office of the Advocate for Small Business Capital Formation released a series of one-page resources related to how funding should be reported on income statements and balance sheets.

“Understanding a business’s financial statements is critical for investors and business owners alike,” the office’s director, Stacey Bowers, said in a news release. “These new resources aim to provide accessible tools to help small businesses and investors navigate the complexities of funding a small business.”

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