Statement on Adoption of New Requirements for the Lead Auditor’s Use of Other Auditors

I am pleased to support the adoption today of amendments to AS 1201, Supervision of the Audit Engagement, new AS 1206, Dividing Responsibility for the Audit with Another Accounting Firm, and the related revisions to our standards.

The continued globalization of public companies has resulted in increasingly complex audits, which frequently involve multiple audit firms across international markets resulting in increased risk to audit quality. 

Through our inspections and enforcement activities, the PCAOB continues to see deficiencies and areas for improvement in the coordination and communication between lead audit firms and other auditors. Such deficiencies frequently arise due to insufficient coordination and miscommunication between the lead auditor and other auditors, which results in misunderstandings about the nature, timing, and extent of the other auditors’ work. 

The amendments to AS 1201 strengthen the required involvement of lead auditors in planning and supervising the work of other auditors, and in so doing should improve audit quality and therefore investor protection.

The changes to our existing standards will better ensure that the lead auditor is sufficiently involved in, and evaluates, the procedures performed by other audit firms. Such involvement should improve audit quality through better communication among auditors and increase the ability of the lead auditor to prevent or detect deficiencies in those procedures before the lead auditor issues its audit report, and before harm to investors can occur.

The standard and related revisions adopted today incorporate our consideration of comments we received in prior proposals released in 2016, 2017, and 2021, along with stakeholder input and the results of our oversight activities since then.

In closing, I would like to recognize and thank all those at the PCAOB who have contributed to this effort — including the staff in our Offices of the Chief Auditor, Economic and Risk Analysis, and General Counsel. I would like to especially recognize those individuals from the Office of the Chief Auditor currently on the project team: Barb Vanich, Stephanie Hunter, Dima Andriyenko, Hunter Jones, and Andrew Cleve. I would also like to thank the SEC’s staff for their support and assistance.