On the second day of this year's 2024 AICPA & CIMA Conference on Current SEC and PCAOB Developments, PCAOB Board members reflected on efforts to improve audit quality through their ambitious standard-setting over the past few years. In addition, Chair Erica Williams touched on the important theme of firm culture that echoed remarks by SEC Chief Accountant Paul Munter on Day 1 of the Conference.
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Firm reporting and firm and engagement metrics. The Board approved the final amendments in November 2024 that it believes will enhance the transparency and comparability of information regarding audit firms. The firm and engagement metrics amendments require audit firms to disclose 14 metrics across eight areas: six requiring metrics at both firm and engagement levels and two at the firm level only. The firm reporting amendments require firms to report incremental information on both annual and special reporting, including financial and governance information. Both standards have been submitted to the SEC for approval. Submit comments on the final amendments to the SEC here for firm reporting and here for firm and engagement metrics.
Quality control. The new standard introduces a risk-based approach suitable for firms of various sizes and complexities, while requiring each QC system to be rigorously designed, implemented and operated for firms that perform audits under PCAOB auditing standards. Staff has also released a practice aid detailing changes that may exceed other standard setters' quality control standards, helping firms enhance their QC systems to comply with both PCAOB and other standards. Read more about the standard here.
General responsibilities of the auditor in conducting an audit. Vanich emphasized that this standard enhances and consolidates a set of standards that were initially adopted on an interim basis by the PCAOB in April 2003. The standard addresses the general principles and responsibilities of auditors, including due professional care and professional skepticism. Read more about the standard here.
Amendments related to aspects of designing and performing audit procedures that involve technology-assisted analysis of information in electronic form. These amendments update PCAOB auditing standards to more specifically address audit procedures performed using technology-based tools. Vanich discussed how the amendments will improve auditors’ execution in performing audit procedures using technology-assisted analysis for the benefit of investors and other users of financial statements. Read more about the standard here.
Critical audit matters. Vanich also discussed their ongoing research project on critical audit matters, highlighting the investor interest in enhancement in both the number of critical audit matters and their content. She encouraged the auditors to take a fresh look at their methodology around the determination of critical audit matters and whether reported CAMs are providing decision-useful information to the investors in the spirit of the standard.