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How organizations, especially finance departments, interact with auditors could get a major update after the Public Company Auditing and Oversight Board (PCAOB) proposed a new, streamlined auditing standard earlier this week.
The proposed standard, known as AS 1000, consolidates and modernizes five existing standards into a single, new standard to reflect changes in technology and business and redefines the role and responsibilities of an auditor. The current standards were written by the American Institute of Certified Professional Accountants and adopted by the PCAOB on an interim basis in 2003.
“Our capital markets never stop evolving, and PCAOB standards must keep up to keep investors protected,” said PCAOB Chair Erica Y. Williams in a statement. “This proposal would modernize standards that are foundational to audit quality, ensuring they are fit to meet today’s challenges.”
Among the changes, AS 1000 would reduce the amount of time that auditors have to file audit documentation, from 45 days to 14 days. The PCAOB inspects that documentation to ensure compliance with auditing standards. The shorter deadline means that the PCAOB can get material information to investors sooner, Williams told the Wall Street Journal.
The new standard would also clarify the engagement partner’s responsibilities in the auditing process, highlight ethical requirements, and more clearly spell out audit documentation requirements. The proposal is part of a concerted effort to improve audit quality after a series of auditing scandals.
The PCAOB is a nonprofit corporation under SEC jurisdiction that oversees public company audits and regulates auditors. The public comment period on AS 1000 is open until May 30, 2023.—DA