The PCAOB has issued an investor advisory highlighting the need for investors to exercise caution when relying on proof of reserve reports to conclude that there are sufficient assets to meet customer liabilities given inherent limitations associated with these reports.

Williams discussed the need for updating standards, citing proposals and changes made by the PCAOB. She outlined efforts to address issues such as noncompliance and emphasized the importance of public comments in shaping standards. She also discussed PCAOB's enforcement actions, including sanctions and penalties, to ensure accountability and protect investors.

Williams encouraged firms to focus on quality control and remediation for improved audit quality and concluded by emphasizing the crucial role auditors play in fostering confidence in the financial system and protecting investors.

Access the speech on the PCAOB website

Here are some excerpts from the speech:

“This means audit opinions were signed without completing the audit work required to verify the accuracy of the financial statements. That is a serious problem at any rate, and 40% is completely unacceptable. I have challenged auditors to sharpen their focus and called on audit committees to hold their firms accountable. Of course, as our third pillar of strengthening enforcement suggests, the PCAOB has not hesitated to bring enforcement cases against auditors when appropriate.”

In addition to discussing enforcement, she highlighted the PCAOB’s efforts to improve the transparency of inspection results:

“In May, we announced enhancements to make our inspection reports more transparent with a new section on auditor independence and a range of other improvements to make more relevant, reliable, and useful information available for investors, researchers, and others.

In July, we rolled out new features on our website to help users compare inspection report data.

This was just the beginning of our work to increase transparency and make PCAOB data more accessible.

Transparency is one of the most powerful tools the PCAOB has to improve audit quality. Sharing our inspection results empowers audit committees and boards of directors – which are responsible for hiring auditors of public companies – to hold audit firms accountable directly.”

Re­view the speech on the PCAOB web­site.

The proposal would, among other things, “establish specific requirements for auditors to understand management’s processes regarding compliance with laws and regulations, which can provide insight into the company’s control environment, and to identify, through inquiry and other procedures, laws and regulations applicable to the company with which noncompliance could reasonably have a material effect on the financial statements.” Comments on the proposal are due by August 7, 2023.

Re­view the press release on PCAOB’s website and our project summary.

Specifically, audit deficiencies were observed in the following areas:

• Fraud and significant unusual transactions.
• Crypto asset ownership.
• Relevance and reliability of information used as audit evidence.
• Revenue recognition related to the transfer of crypto assets.
• Arrangements with mining pool operators.

In addition, the publication addresses best practices and reminders for auditors to consider when performing their audit procedures.

Re­view the publication on PCAOB’s website.

Specifically, the proposal would:

• Clarify “the differences between tests of details and analytical procedures and emphasize the importance of appropriate disaggregation or detail of information.”
• Specify “the auditor’s responsibilities when using audit evidence for more than one purpose.”
• Outline “considerations for the auditor’s investigation of items when designing or performing substantive audit procedures.”
• Address the auditor’s “responsibilities for evaluating the reliability of certain audit evidence.”

Comments on the proposed amendments are due by August 28, 2023.

Re­view the proposed amendments on PCAOB’s website.

The proposal would (1) modernize a group of standards that the PCAOB adopted on an interim basis in 2003 and (2) address core auditing principles and responsibilities, such as “reasonable assurance, professional judgment, due professional care, and professional skepticism. Comments on the proposed rule are due by May 30, 2023.

For more information, see the press release and the proposed new standard on the PCAOB’s website.

To modernize the PCAOB’s confirmation standard, the proposed standard includes principles-based requirements that would apply to all methods of confirmation, including paper-based and electronic communications. The proposal, if adopted, would better integrate the PCAOB’s confirmation standard with its risk assessment standards.

The confirmation process touches nearly every audit. It involves an auditor sending a confirmation request directly to a confirming party (e.g., a financial institution), evaluating the information received, and addressing nonresponses and incomplete responses to obtain audit evidence about one or more financial statement assertions.

When properly designed and executed, confirmation can be a critical part of the evidence that auditors obtain to support their opinion regarding a company’s financial statements. A properly designed and executed confirmation can also be an important response for auditors to address fraud risks.

Detailed questions are included throughout the proposal, and commenters are encouraged to:

1. comment on any or all topics
2. respond to any or all questions
3. provide feedback in areas not covered by specific questions, and
4. provide any evidence that informs commenters’ views.

Review the proposal on the PCAOB's website.

Once finalized, ISSA 5000 will serve as a comprehensive, stand-alone standard suitable for limited and reasonable sustainability assurance engagements. It will apply to sustainability information reported across any sustainability topic and prepared under multiple frameworks. Moreover, the standard will be profession-agnostic, enabling its use by professional accountants and other professionals performing sustainability assurance engagements.

Access the news release on the IAASB website.

Review the publication on the IAASB's website.