Changes in Use of Data and Technology in the Conduct of Audits

(Updated May 12, 2020)

Objective


Assess whether there is a need for guidance, changes to PCAOB standards, or other regulatory actions in light of the increased use of technology-based tools by auditors and preparers.

Background


Advancements in technology are affecting the nature, timing, preparation, and use of financial information. Auditors are expanding their use of technology-based tools, including data analytics, to plan and perform audits. Innovations in these technologies have the potential to improve the efficiency and effectiveness of both the audit and the financial reporting process. Further, the increased use of these technologies could affect, among other things, the nature and extent of information available to auditors, how an audit is performed, and audit firms' quality control systems.

In assessing whether there is a need for guidance, changes to PCAOB standards, or other regulatory actions, the staff has considered: observations from the Board's oversight activities, changes to audit firms' methodologies, academic research, outreach with stakeholders, and the activities of others, including other standard setters and regulators. The staff's considerations have also been informed by the PCAOB Data and Technology Task Force, whose members provide the staff with additional insights into the use of technology-based tools, including data analytics, by auditors and preparers.

Status


The staff's activities to date have indicated that PCAOB standards are not currently impeding or detracting from firms’ ability to use technology-based tools. However, PCAOB standards do not explicitly encourage the use of such tools or indicate when their use might be appropriate, or highlight related risks or pitfalls. The staff will consider how this could be addressed as part of our ongoing evaluation of our standards, including whether there is a need for guidance, changes to PCAOB standards, or other regulatory actions.

The staff's activities have included gaining an understanding of how technology-based tools, including data analytics, are used by auditors to identify and assess risks of material misstatement. The staff's next steps will focus on the following:

  • Assessing changes in the use of technology in auditing and financial reporting;
  • Obtaining a more in-depth understanding of how auditors are using technology in responding to identified risks of material misstatement;
  • Continuing to analyze how requirements in PCAOB standards apply; and
  • Collaborating with other regulators and standard setters, as appropriate.

The staff is also considering the evolving and greater use of technology by firms in performing engagements as part of the project on potential revisions to PCAOB quality control standards.