Chair Williams’ Statement on Adoption of Amendments To Clarify Auditor Responsibilities When Using Technology-Assisted Analysis

Remarks as prepared for delivery

Our capital markets do not stand still. They evolve constantly. Practices change, and technology advances relentlessly.  

To keep investors protected, our standards must keep up. This is why I and my fellow Board Members specifically included modernizing our standards as the first goal of our strategic plan. And, further why we have an objective within this goal focused on evaluating developments in data and technology as we consider enhancements to our standards.  

Audit procedures that involve technology-assisted analysis offer the potential to be an effective approach to obtain persuasive audit evidence, enhancing investor protection.  

Today, some firms are using technology-assisted analysis to obtain audit evidence. In certain cases, our oversight activities have found instances of noncompliance with our standards related to evaluating the relevance and reliability of company-provided information and evaluating certain items identified using technology-assisted analysis. 

Other firms appear to be reluctant to perform technology-assisted analysis due to perceived regulatory uncertainty, as our standards do not specifically address the performance of such analysis.  

Consequently, and as highlighted by our economic analysis, there is a need to change our standards to address more specifically certain aspects of designing and performing audit procedures that involve such analysis. This is why we issued a proposal – just shy of one year ago – to amend our standards in this area. 

I am grateful for the commenters that provided feedback on the proposal. The staff have taken your input into consideration in updating the amendments before us today. This project focuses on areas where PCAOB oversight activities have identified instances of noncompliance with PCAOB standards and areas where auditors have raised questions during our research regarding the applicability of PCAOB standards to the use of technology-assisted analysis. 

These areas include: 

• Specifying auditors’ responsibilities when performing tests of details,

• Using an audit procedure for more than one purpose,

• Investigating certain items identified by the auditor when performing a test of details, and

• Evaluating the reliability of information the company receives from external sources that is provided to the auditor in electronic form and used as audit evidence.  

These changes address the risks that exist when using technology-based tools to design and perform audit procedures that involve technology-assisted analysis. For example, if an auditor does not appropriately investigate certain items identified through technology-assisted analysis when performing a test of details, the auditor may fail to identify misstatements that would need to be evaluated under PCAOB standards.  

In other situations, the amendments noted in this project address the risk that an auditor may inappropriately rely on information received electronically from a third party via the company without properly evaluating whether the information is sufficient and appropriate for purposes of the audit. 

Equally important, these changes also address the risk that some auditors may choose not to perform audit procedures that involve technology-assisted analysis due to concerns about its appropriateness under existing standards – even if performing such procedures would be a more effective way of obtaining audit evidence.  

Collectively, these changes will improve auditors’ execution in performing audit procedures using technology-assisted analysis for the benefit of investors and other users of companies’ financial statements. The economic analysis included in the release further supports these and other benefits of the amendments to our standards.  

As this is just one aspect related to developments in data and technology in the accounting and auditing professions, our data and technology research project remains active. Our staff will continue to leverage insights from this research project as they assess the need for guidance, other changes to PCAOB standards, or other regulatory actions considering the increased use of technology-based tools by auditors and preparers. 

I would like to express my gratitude to those individuals that have significantly contributed to this project. Specifically, I would like to thank in the Office of the Chief Auditor, Barb Vanich, Dima Andriyenko, Dominika Taraszkiewicz, Donna Silknitter, Rob Kol, Hunter Jones, and Fran Lison; in the Office of Economic and Risk Analysis, Martin Schmalz, Erik Durbin, Mike Gurbutt, John Cook, Carrie Von Bose, and Nick Galunic; and in the Office of General Counsel, Connor Raso, Katherine Kelly, and Vince Meehan. 

I would also like to thank my fellow Board Members and their staff for their contributions. In addition, I would like to recognize the support provided by staff from the Division of Registration and Inspections, the Division of Enforcement and Investigations, and the Office of Communications and Engagement. 

Finally, I would like to thank the Securities and Exchange Commission’s staff, including the staff of the SEC’s Office of the Chief Accountant, for their support and assistance.