Statement in Support of Technology-Assisted Analysis Amendments

Remarks as prepared for delivery

Good afternoon, and thank you again, Chair Williams.

I am pleased to support this recommendation, which admirably clarifies and amends PCAOB standards to support the auditor’s use of technology-based tools and the sufficiency and appropriateness of audit evidence in situations involving technology-based tools. Ensuring our standards are modernized and fit for purpose is not only in keeping with the Board’s 2022-2026 Strategic Plan, but also makes practical sense and will assist individual auditors in performing audit tasks to better ensure audit quality.  

I have had a front-row seat to the dramatic way the use of technology in audits has changed within just one generation. I recall vividly when, early in my auding career, shared computers first became available to engagement teams, and Lotus 1-2-3 was state-of-the-art software. Regression analysis tools used in substantive analytical procedures would look woefully rudimentary to today’s auditors. Instead, our profession now relies on sophisticated analytical instruments to aid in the data extraction, transaction testing, and reconciliation testing that comprise modern audits.

               The PCAOB is engaged in a multiyear effort to modernize standards; nowhere can the need for modernization be seen more plainly than in the face of the constant march of technology. That is why I am so impressed with what the staff has put together today. These principles-based amendments account for how automation, data analytics, and other processes are currently used in audits, while retaining enough flexibility to account for their inevitable evolution in ways we cannot anticipate.

There are many aspects of these amendments worth highlighting, but I will limit myself to four main points:

• First, the amendments relate to two standards that are fundamental to the execution of audits – AS 1105, Audit Evidence, and AS 2301, The Auditor’s Responses to the Risks of Material Misstatement. The auditor’s responsibilities in these areas do not change with the nature or type of technology used in the audit, which the release makes clear.
• Second, the amendments to AS 2301 include specifying auditor responsibilities when investigating items that require further investigation.
• Third, the amendments clarify the responsibilities when using an audit procedure for more than one purpose.
• Finally, the amendments update our auditing standards to more specifically address the reliability of information used in designing and performing audit procedures that involve analyzing information in electronic form with technology-based tools. This includes information such as cash receipts, shipping documents, and purchase orders.

In designing these amendments, the staff considered findings from our inspection activities and honed in on the all-too-frequent observation of over-reliance on data produced by the company under audit. ¹ The amendments respond by undertaking to ensure auditors have sufficient appropriate audit evidence to support the opinion, and allow for auditors to execute their procedures in the most effective way available. The whole exceeds the sum of its parts, and all of these individual components work together to benefit audit quality.

Conclusion

I will close, first, by thanking all those who took the time and effort to submit comment letters. Your perspective on these amendments was detailed and valuable, and the final product reflects those contributions.

Second, my thanks to the staff for their work on these amendments and their responses to my questions. I extend my gratitude to Barb Vanich, Dima Andriyenko, Dominika Taraszkiewicz, Donna Silknitter, Hunter Jones, Rob Kol and Fran Lison of the Office of the Chief Auditor; to Martin Schmalz, Erik Durbin, John Cook, Carrie von Bose, and Dylan Rassier of the Office of Economic and Risk Analysis; to Connor Raso, Katherine Kelly, Jennifer Williams, and Katie Reilly of the Office of the General Counsel; and to staff from the Division of Registration and Inspections and the Division of Enforcement and Investigations for their contributions.