The new standard would require all PCAOB-registered firms to identify their specific risks and design a QC system with policies and procedures to guard against them.

 Key Provisions of the New Standard:

• The new standard adopts a balanced approach to Quality Control (QC), combining a risk-based strategy that encourages proactive risk management with set mandates to ensure rigorous QC system design, implementation, and operation.
• All firms registered with the PCAOB must design a QC system that complies with this standard, continuously monitor its operations, and take corrective actions for any inefficiencies, fostering continuous improvement.
• Such firms must also conduct an annual evaluation of their QC system and submit the results to the PCAOB via the new Form QC, endorsed by critical firm personnel, to enhance individual accountability.
• Firms auditing over 100 issuers annually must establish an External QC Function (EQCF) for independent judgment on the QC system, including evaluating significant judgments made in assessing and reporting on the QC system's effectiveness.

The Board developed the improvements to PCAOB QC standards through consultations with advisory groups. It issued a concept release in December 2019 and a proposal for public comment in November 2022. Substantial stakeholder feedback and PCAOB's economic analysis collectively informed the new standard.

In designing, implementing, and operating their QC systems, the PCAOB expects firms that are subject to both PCAOB standards and IAASB QC standards— which the PCAOB believes constitute a very substantial majority of firms that perform engagements under PCAOB standards—can leverage the work they have already done and the investments they have already made to comply with those other requirements.

Access the new standard on the PCAOB’s website.