PCAOB Proposes a New Quality Control Standard
Proposal advances strategic goal of modernizing standards
The Public Company Accounting Oversight Board (PCAOB) today issued for public comment a proposed standard that the Board believes would, if adopted, lead registered public accounting firms to significantly improve their quality control (QC) systems. The Board requests public comment on the proposal by February 1, 2023.
“Quality control systems set the foundation for how firms perform their audits, so making sure those systems are effective in today’s economy is essential to protecting investors,” said PCAOB Chair Erica Y. Williams.
Current QC standards were developed and issued by the American Institute of Certified Public Accountants before the PCAOB was established in 2002. The auditing environment has changed significantly since that time, so QC is a pressing area for modernization.
The Board has carefully considered the potential for improvements to PCAOB QC standards, including through discussion with the PCAOB’s former advisory groups. In December 2019, the Board issued a concept release that generated comment letters from firms, investors, investor advocates, academics, trade groups, and others. This input, along with the PCAOB’s own quantitative and qualitative economic analysis, helped to inform the proposal.
The proposed standard, if adopted, would replace the current QC standards in their entirety and would provide a framework for a firm’s QC system that is grounded in proactively identifying and managing risks to quality, with a feedback loop from ongoing monitoring and remediation designed to drive continuous improvement. Among other provisions, the proposal would foster a more structured approach where a firm would annually evaluate its QC system and report the results of its evaluation on new Form QC.
Detailed questions are included throughout the proposal, and commenters are encouraged to (1) comment on any or all topics, (2) respond to any or all questions, (3) provide feedback in areas not covered by specific questions, and (4) provide any evidence that informs commenters’ views.
About the PCAOB
The PCAOB is a nonprofit corporation established by Congress to oversee the audits of public companies in order to protect investors and further the public interest in the preparation of informative, accurate, and independent audit reports. The PCAOB also oversees the audits of brokers and dealers, including compliance reports filed pursuant to federal securities laws.
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