Tag: PCAOB standard audits involving multiple audit firms

SEC approves new PCAOB requirements for lead auditor’s use of other auditors

At the end of last week, the SEC approved the PCAOB’s updated standards for audits that involve multiple auditing firms. SEC Chair Gary Gensler said that the amended standards “will strengthen the requirements for lead auditors who supervise other auditors in an audit, helping to enhance audit quality and protect investors.”  Why were these updates necessary? According to Gensler, the globalization and increasing complexity of public company operations has meant that auditors must increasingly “rely on other auditors—working across different firms, countries, and even languages—in completing an audit. Last year,” he said, “26 percent of all issuer audit engagements used multiple auditors, and more than half of large accelerated filer audits used multiple auditors. Given the challenges that such multi-firm audits present, it is important that there be robust standards for how lead auditors supervise, communicate with, and coordinate with other auditors on the audit engagement.”  Gensler noted that the updates enhance the standards “across two broad areas. First, the amended standards specify certain procedures for lead auditors to perform when supervising other auditors. Second, they require lead auditors to prioritize their supervisory activities around higher-risk areas in the audit.”  PCAOB Chair Erica Williams observed that companies “continue to increase their global presence. As a result, the use of other auditors has become more prevalent in the conduct of an audit, which can create additional challenges for the lead auditor. Adding other auditors into the process requires careful consideration and clear communications between all auditors involved in the audit. And when miscommunication occurs or when there are misunderstandings about the nature, timing, and extent of the other auditor’s procedures, audit quality will likely suffer.” It’s worth noting that some aspects of the new amendments will affect communications with the audit committee. The amendments will be effective for audits of financial statements for fiscal years ending on or after December 15, 2024.