Chair Williams’ Statement on New Standard on General Responsibilities of the Auditor

Remarks as prepared for delivery

Just over a year ago, the PCAOB issued a proposal on a project that included a new proposed standard, AS 1000, that would replace a group of standards originally developed by the American Institute of Certified Public Accountants and adopted on an interim basis by the PCAOB in 2003.

As we just heard, this group of standards addresses reasonable assurance, due professional care, professional skepticism, independence, competence, and professional judgment. Together, we refer to these standards as our “foundational standards.”

The new standard and amendments before us today would modernize, clarify, and streamline the general principles and responsibilities of auditors and provide a more logical presentation, which should enhance the useability of the standards by making them easier to read, understand, and apply.

Among other things, this project includes amendments to clarify the auditor’s responsibility to evaluate whether the financial statements are “presented fairly.” There are also amendments that clarify the engagement partner’s due professional care responsibilities by adding specificity to certain audit performance principles set out in the standards. And, there are amendments that accelerate the documentation completion date to reflect changes in the auditing environment, including advancements in technology that have enabled auditors to assemble a complete and final set of audit documentation in less time than in a paper-based environment.

I am pleased to be here with you today as I and my fellow Board Members are presented with the adopting release for this project, which reaffirms the general principles and responsibilities of the auditor and solidifies the foundation of every audit, leading to investor protection and informative, accurate, and independent audit reports.

As always, the public comment period was an essential part of getting this right. I want to thank everyone who provided comments on our proposal and highlight some of the changes made in response to your feedback:

• In order to clarify that the standard's introductory language does not create any new legal obligation for auditors, we revised the introductory paragraph from what was proposed to clarify that we are expressing a longstanding principle of public accounting -- specifically, that the auditor’s responsibility to protect investors transcends the auditor’s relationship with management and the audit committee of the company under audit. We have further clarified that this responsibility provides the foundation for an objective and independent audit.
• We moved the requirements addressing the engagement partner’s responsibility for due professional care into a separate paragraph to highlight the important role engagement partners play and to help draw a distinction between the responsibilities applicable to all auditors and those that are incremental for engagement partners.
• We included additional clarification that an auditor’s professional skepticism extends to other information that is obtained to comply with PCAOB standards and rules. This would include, for example, information obtained by the auditor from other auditors in a multilocation audit, to comply with the requirements to properly complete Form AP.
• Our proposal to clarify what is meant by the phrase “presented fairly” through amendments to AS 2810, Evaluating Audit Results, was not intended to change the auditor’s existing responsibilities for evaluating whether the financial statements are presented fairly in conformity with the applicable financial reporting framework. However, several commenters interpreted the proposed requirements differently. As such, we made changes to address this concern.
• And, we are providing a phased-in approach related to the requirement to assemble a complete and final set of audit documentation for retention not more than 14 days after the report release date. This will give smaller firms additional time to comply with the new documentation completion deadline.

We appreciate your feedback and the standard and amendments that are before us today are better for it.

I would like to thank the individuals that have devoted significant effort on this project. Specifically, I would like to thank in the Office of the Chief Auditor, Barbara Vanich, Dominika Taraszkiewicz, Ekaterina Dizna, Hunter Jones, Cheryl Hennig, and Akiko Upchurch; in the Office of Economic and Risk Analysis, Martin Schmalz, Michael Gurbutt, and Dylan Rassier; and in the Office of the General Counsel, Connor Raso, Vince Meehan, and Katie Reilly.

In addition, I would like to express my gratitude to my fellow Board Members and their staff for their contributions to this project. I would also 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 (SEC) staff, including the staff of the SEC’s Office of the Chief Accountant for their support and assistance.