Statement on the AS 1000 Adoption –Refreshed General Auditor Responsibilities

Remarks as prepared for delivery

Thank you, Chair Williams. Today we are adopting the new auditing standard, AS 1000 General Responsibilities of the Auditor in Conducting An Audit and Amendments to PCAOB Standards, to replace the American Institute of CPAs (AICPA) standards that the PCAOB adopted on an interim basis 21 years ago. I would like to recognize and thank the commenters for their perspectives on the AS 1000 proposal, which was released on March 28, 2023. I always pay close attention to the comments, as they are an essential aspect of making sure that we set standards that are practical to promote audit quality and support our mission of protecting investors. Based on the feedback received, I want to note a few key areas of commenters’ concerns and our response.

Perceived Legal Duty to Investors

One commenter noted that “…the auditor’s role should not be confused with a legal duty owed to investors.”¹ Another commenter suggested removing the term obligation or adding a clear statement regarding the scope of legal duty.² Additionally, a commenter suggested using the term “responsibilities” instead.³ In common terms, an obligation represents something that has to be done, whereas responsibility is something that should be done. These terms are frequently used interchangeably but can have different meanings based on the associated context. In this context, the adopting release affirms that these terms are used synonymously.

I commend the staff for considering input from commenters and modifying the adopting release to confirm that the term “obligation” does not establish a new duty nor creates a new form of legal obligation. Rather, the intent is to reaffirm the auditor’s obligation under the existing legal framework and the important role of the auditing profession in our capital markets.

I hope that it is clearly understood by all stakeholders and our inspections division that this language is truly intended to reaffirm and not to create new legal duties, such as creating a new fiduciary duty of auditors. Independent auditors are not fiduciaries due to the independence requirements.⁴ Instead, auditors provide an audit report on the financial statements where the auditors “…obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.” Under this context, this standard provides a renewed foundation to refresh investor trust in the audit profession.

Perceived Expansion of Auditor's Evaluation of Fairness

One commenter also expressed concerns regarding the perceived expansion of the auditor’s “evaluation of fairness” related to the financial statements.⁵ Again, staff addressed this concern by acknowledging that the auditor’s evaluation of the fairness of the presentation of the financial statements is an exercise of professional judgment in relation to the applicable financial reporting framework. As such, the revision emphasizes that “The applicable financial reporting framework provides the basis for the auditor’s judgment regarding the presentation of financial position, results of operations, cash flows, and disclosures in financial statements.” Again, I commend staff for thoughtfully addressing this concern.

Engagement Partner Responsibilities 

Separately, this standard clarifies the engagement partner’s existing responsibilities for supervision, for example specifically stating that“…the work of other engagement team members does not replace or reduce the engagement partner’s responsibility” and requires that “The engagement partner’s review should include review of documentation of significant findings or issues (see AS 1215.12) and review of documentation required to be reviewed by the engagement quality reviewer ….”  I support these requirements in improving audit quality.

Final Set of Audit Documentation

This adopting release acknowledges that advancements in technology increase the availability of electronic audit tools and the use of audit software. Since the interim standard was adopted, technology has enabled auditors to transition from paper-based audit documentation to electronic workpapers. As such, auditors have the ability to complete the final set of audit documentation in less time, resulting in an accelerated period to complete the final set of audit documentation from 45 days to 14 days within this standard. A commenter indicated their support for the accelerated period, with the caveat that there should be sufficient time for certain firms to implement changes to “…systems and technology, which will take time and impacts methodology, policies, practices, and behaviors.”⁶ I appreciate that the staff considered commenter input and provided an additional year for small firms to comply with this specific requirement.

Bringing the associated interim standards to an end, I support the adoption of this new standard. I would like to express my appreciation to the Office of the Chair, the Office of the Chief Auditor, and the Office of Economic and Risk Analysis for their contributions to this final standard.

Thank you. Back to you, Chair Williams.