The PCAOB adopted a new audit standard yesterday (AS 1206, Dividing Responsibility for the Audit With Another Accounting Firm) to ensure that lead auditors are properly supervising the outside auditors they use.
The Public Company Accounting Oversight Board (PCAOB) today adopted amendments to its auditing standards [PDF] to strengthen requirements that apply to audits involving multiple audit firms. The amendments, which benefited from three comment solicitations, aim to improve the quality of audits where other accounting firms or individual accountants perform important work on the audit.
“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,” said PCAOB Chair Erica Y. Williams. “These amendments will require audit firms to ensure that lead auditors sufficiently plan, supervise, and evaluate the work of other auditors.”
The Board has adopted amendments to its standards, interpretations, rules, and forms that:
· AS 1015, Due Professional Care in the Performance of Work;
· AS 1105, Audit Evidence;
· AS 1201, Supervision of the Audit Engagement;
· AS 1215, Audit Documentation;
· AS 1220, Engagement Quality Review; and
· AS 2101, Audit Planning;
- (2) Rescind AS 1205, Part of the Audit Performed by Other Independent Auditors, and AI 10, Part of the Audit Performed by Other Independent Auditors: Auditing Interpretations of AS 1205;
- (3) Adopt AS 1206, Dividing Responsibility for the Audit with Another Accounting Firm; and
- (4) Make additional conforming amendments.
These amendments are intended to improve PCAOB standards 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.
Subject to approval by the Securities and Exchange Commission, the amendments will take effect for audits of financial statements for fiscal years ending on or after December 15, 2024.