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Auditors, better mind your p’s and q’s.
The PCAOB has fined firms more than $33 million so far this year—and it’s only April. It’s already blown past the record $20+ million in penalties it levied last year.
And the rest of 2024 could be just as busy.
In July 2023, the organization released a report showing that 40% of the audits it inspected in 2022 had deficiencies. At the time, Chair Erica Williams called the findings “absolutely unacceptable” (regulator-speak for “we’re majorly ticked off”). It had just fined Marcum $3 million for lax quality control standards, its highest-ever penalty for a non-affiliate firm. But that paled in comparison to the $25 million it fined KPMG Netherlands last week for sharing answers on exams.
Regs on the horizon: 2023 was the PCAOB’s most active regulatory year in a decade, according to its annual report. It adopted one new standard meant to “strengthen and modernize” the procedures auditors use to confirm financial statement information with third parties. It also made four proposals:
- AS 1000, which would “reorganize and consolidate a group of standards” around key auditing principles, including professional judgment and care, professional skepticism, and reasonable assurance;
- A proposal to strengthen the requirements for identifying and communicating noncompliance with laws and regulations (NOCLAR);
- A proposal that would specify aspects of technology-assisted audits that auditors need to take into account; and
- An update to a rule that would let the PCAOB sanction people who contribute “negligently, directly, and substantially” to accounting firms’ rule violations.
The PCAOB expects to adopt four measures in 2024, according to Deloitte: AS 1000, the NOCLAR proposal, the technology-assisted audit proposal, and a quality-control proposed in 2022. And it plans to release four new proposals dealing with attestation standards, going concerns, firm and engagement performance metrics, and substantive analytical procedures.
Audit committees, you officially live in interesting times.
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