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On February 5, 2024, Securities and Exchange Commission (SEC) Chief Accountant Paul Munter issued a statement calling for increased quality of public company audits.
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On February 5, 2024, Securities and Exchange Commission (SEC)
Chief Accountant Paul Munter issued a
statement calling for increased quality of public company
audits. Munter's statement follows
findings from the Public Company Accounting Oversight
Board (PCAOB) of increased deficiency rates in recent
year-over-year inspections, and alludes to new and existing risks
that "may put pressure on the operations and financial health
of companies and render financial reporting and auditing more
challenging."
In his statement, Munter addresses responsibilities of audit
committees and independent auditors in protecting the investing
public and provides suggestions for each.
AUDIT COMMITTEES
AUDITORS
Prioritize audit quality when selecting an auditor.
Frequently evaluate process for assessing auditor performance,
including through:
PCAOB inspection results.
Engagement team industry expertise.
Engagement team total hours and staffing mix.
Engagement team changes from previous audits.
Support auditor independence, including through:
Open dialogue and meetings with the auditor independent of
management.
Probing questions to assess audit quality.
Directly speaking with the audit engagement team about the
importance of professional skepticism.
Avoiding substituting audit committee judgment of the auditor
with that of management.
Request more persuasive evidence to corroborate management
assertions during periods of economic uncertainty.
Frequently and proactively engage with a company's audit
committee.
Integrate expert specialists to assist in auditing complex
areas or where specialized knowledge is needed.
Ensure engagement teams are appropriately trained on biases
that can affect auditor judgment and decision-making.
Ensure that audit staff are empowered to exercise professional
skepticism and challenge the judgments of management.
Munter's comments suggest an increased focus by the SEC on
public company audit quality, and particularly areas that have been
identified by the PCAOB as having the highest rates of deficiency,
including auditor testing of management review controls,
auditors' selection of controls to test, and auditors'
selection of controls over the completeness and accuracy of
information used in the operation of the controls.
Winston's Capital Markets and Securities Law Watch will
continue to monitor the SEC's positions on public company audit
quality and will post additional updates as they become
available.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
SEC Chief Accountant Issues Statement On Public Company Audit Quality
United StatesAccounting and Audit
Contributor
Winston & Strawn LLP is an international law firm with 15 offices located throughout North America, Asia, and Europe. More information about the firm is available at www.winston.com.
