Nearly three weeks after getting reamed out publicly by SEC Chair Gary Gensler for being way too slow to update auditing standards that had been in effect BEFORE the PCAOB was created by the Sarbanes-Oxley Act, everyone’s favorite audit regulator released a draft of its five-year strategic plan, which includes four goals they hope to accomplish from 2022 to 2026. And guess what the first goal is:
1. Modernizing standards
In its five-year strategic plan, the PCAOB says:
In May 2022, we announced one of the most ambitious standard-setting agendas in the organization’s history.
Effective audit, attestation, quality control, ethics, and independence standards advance audit quality and are foundational to the PCAOB’s execution of its mission to protect investors. These standards provide the requirements auditors must satisfy when conducting their audits. They also serve as a basis against which our inspectors inspect firms and our enforcement teams investigate firms and associated persons and pursue disciplinary sanctions.
Yet, as important as these standards are, some of them were written by the audit profession and have not been updated since before the PCAOB was established in 2003, when they were adopted on what was intended to be an interim basis.
The world has changed since 2003, and our standards must adapt to keep up with developments in auditing and the capital markets. We intend to modernize and streamline our existing standards and to issue new standards where necessary to meet today’s needs.
A day after Gensler called out the PCAOB for being lazy in its standard setting, PCAOB Chair Erica Williams responded by saying, “Just six months into my term, we are already actively working to update more than 25 standards within eight standard-setting projects. And we are just getting started.”
And they finally got one done! Last week the SEC approved an update to an existing auditing standard that the PCAOB got around to modernizing—the first since Williams took over as PCAOB chair in January.
The other goals outlined in the PCAOB’s five-year plan are:
2. Enhancing inspections
3. Strengthening enforcement
4. Improving organizational effectiveness
The PCAOB has put its draft five-year plan up for public comment, so if you want to add your two cents, you can do so until Sept. 15. Comments can be submitted by email to [email protected]; or by postal mail to the Office of the Secretary, PCAOB, 1666 K Street, NW, Washington, DC 20006-2803.
“The people we serve are top of mind in everything we do at the PCAOB, and we look forward to hearing from the public as we move forward with our ambitious plan to protect investors,” Williams said in a written statement.
Be careful what you wish for, Erica.
The PCAOB Hasn’t Done a Lot With Audit Standards in the Last 20 Years But They’re Getting Around to It Now