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Things that can be said by either the Public Company Accounting Oversight Board (PCAOB) or your friends trying to help you date better people: It’s time for us to raise our standards, okay?
And that’s exactly what will happen now that the PCAOB has signoff on new standards from the Securities and Exchange Commission (SEC). Auditors will now be on the hook for violations caused by negligence, not just recklessness, after commissioners voted to approve the update to PCAOB Rule 3502: Responsibility Not to Knowingly or Recklessly Contribute to Violations, Reuters reported, with Democratic members prevailing in a 3–2 vote.
PCAOB Chair Erica Williams hailed the vote in a statement. “With this rulemaking, which updates a rule that is nearly 20 years old, the Board has aligned PCAOB rules to what investors expect,” she said. “When an associated person’s negligence directly and substantially contributes to firm violations, the PCAOB has tools to hold them accountable.”
Making it official. Commissioners also approved the PCAOB’s adoption of AS 1000: General Responsibilities of the Auditor in Conducting an Audit, and updated other standards to “reduce the risk that auditors who use technology-assisted analysis will issue an opinion without obtaining relevant and reliable audit evidence,” Williams said.
AS 1000 replaces interim standards from the board’s earliest days in 2003. The new standard gives auditors “clear, consistent, and up to date” standards for “auditing fundamentals such as due professional care, professional skepticism, competence, and professional judgment,” Williams added.