The Public Company Accounting Oversight Board (PCAOB) is seeking public comment on a proposal that would strengthen existing requirements for a lead auditor’s use of other auditors.
In many audits, work is performed by firms or individual auditors outside the firm issuing the report. The proposal spells out a lead auditor’s responsibilities for planning, supervising, and evaluating the work of other auditors.
“In today’s world, many audits, particularly for the largest companies, are multinational,” James Doty, chairman of the PCAOB, said. “This proposal is intended to ensure the appropriate involvement of lead auditors in the work of other auditors.”
PCAOB inspectors have observed that, in recent years, some firms have changed their approach to using other audit firms as the prevalence of audits involving other auditors has increased. Other firms, however, have not changed their approach.
The proposal is intended to increase the lead auditor’s involvement in, and evaluation of, the work of other auditors and impose a uniform approach to the use of other auditors by directing the lead auditor’s supervisory responsibilities to the areas of greatest risk, consistent with PCAOB risk-assessment standards.
It also makes clear that, to act as lead auditor, an audit firm must itself audit a meaningful portion of the financial statements. Further, it requires more explicit procedures to prompt the lead auditor to bolster its involvement in the work of other auditors, including enhanced communication and more robust evaluation of other auditors’ qualifications and work.
“We take public comments very seriously in the standard-setting process,” Martin Baumann, PCAOB chief auditor and director of professional standards, said. “The clarifying changes and other revisions being proposed by the Board today would further improve the requirements for audits involving multiple firms.”
The PCAOB is accepting comments until Nov. 15, 2017.