PCAOB requesting additional comment on proposed amendments to auditing standards on supervision of audits for firms, accountants outside firm that issues audit report.
This is second supplemental request for comment on revisions first proposed in 2016 proposing release (#27150), revised in 2017 supplemental request (#27150).
2021 Supplemental Request for Comment
Proposed to relocate paragraphs of originally proposed Appendix B of AS 2101 (audit planning) and AS 1201 (audit supervision) to the body of each standard.
Amendments for audits on other auditors would apply with the existing requirements.
Revise proposed amendments to locate terms engagement team, lead auditor, other auditor, referred-to auditor in only one standard (AS 2101) with cross-references.
Currently, enhance engagement partner’s assessment if participation of firm sufficient for firm to carry out responsibilities of lead auditor, report on financial statements.
Previously in 2017 SRC, proposed two considerations to take into account: risks of material misstatement; importance of locations, BUs covered by audit procedures.
2021 SRC would add new, third consideration for engagement partner to take into account, that is the extent of the firm’s supervision of other auditors’ work.
That is, engagement partner use 3 considerations (importance, risk, extent of supervision) to determine if full range of involvement enough to serve as lead auditor.
Proposed amendments to AS 2101 on auditor independence and ethics requirements build on existing responsibility of auditor to comply with independence and ethics.
AS 2101.06D revised to expressly refer to lead auditor’s existing responsibility, i.e. in conjunction with determining compliance with independence and ethics requirements.
Require lead auditor obtain understanding of other auditor knowledge of independence ethics requirements, experience; obtain an affirmation about policies and procedures.
Clarify that the lead auditor is required to obtain information about other auditor’s relationships with audit client reasonably be thought to bear on independence.
Amendments not supersede existing requirements of AS 1201 where engagement partner, others with supervisory roles required to carry out supervisory responsibilities.
Further describe procedures for lead auditor on supervision of the work of other auditors in conjunction with the required supervisory activities set forth in AS 1201.
Described proposed amendments on supervisory procedures for multi-tiered audits.
Proposed Effective Date
Board considering whether compliance with proposed amendments and new auditing standard required for audits of fiscal years beginning in the year after SEC approval.
Otherwise for audits of fiscal years 2 years after year SEC approval, if approval in 4Q.
PCAOB Statements
Acting chairperson Duane M. DesParte and board members Rebekah Goshorn Jurata , Megan Zietsman issued statements in support of second supplemental RFC.
Consultation
Comments on 2021 SRC on proposed amendments are due by Nov. 30, 2021.
Jun. 14, 2022 PCAOB Meeting
On Jun. 14, 2022, PCAOB announced that an open meeting will be held on Jun. 21, to consider the adoption of new requirements for a lead auditor's use of other auditors.
Amendments are designed to improve the quality of audits in these circumstances and to align the applicable requirements with PCAOB’s risk-based supervisory standards.
Jun. 21, 2022 PCAOB Final Rule
On Jun. 21, 2022, PCAOB reported lead auditor use of other auditors final rulemaking.
Noted role of globalization/remote work expansion in large public firms as an impetus.
Further, use of AI, algorithms, and automation as underlying factors to codify rules.
It determined risk-based supervision, specificity in principles application, and the evolution of the audit practice requiring uniformity and rigor as final rule drivers.
Final rules: AS 2101 Audit Planning, AS 1201 Supervision of the Audit Engagement.
Also, AS 1206 Dividing Responsibility for the Audit with Another Accounting Firm.
Rescinds AS 1205 Part of the Audit Performed by Other Independent Auditors.
Upon SEC approval, effective for audits of fiscal years ending on/after Dec. 15, 2024.
Jul. 2022 SEC Federal Register
On Jul. 1, 2022, SEC published notice of PCAOB audit supervision rule in fed register.
PCAOB filed the proposed rules on Jun. 24, 2022; SEC issued notice of filing same day.
Comments on the audit supervision proposed rulemaking are due by Jul. 22, 2022.
Aug. 12, 2022 SEC Approval
On Aug. 12, 2022, SEC approved PCAOB final rulemaking on supervision of audits.
Amendments effective for audits of fiscal years ending on or after Dec. 15, 2024.
