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Enhancing public trust in the capital markets by promoting high-quality financial reporting.

<p>The Center for Audit Quality</p>

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Discover the latest insights, resources, and standards in auditing and accounting at the Center for Audit Quality (CAQ) website. Access valuable guidance, research, and tools to enhance your expertise and stay informed in the ever-evolving auditing landscape. 

Vice President, Professional Practice and Anti-Fraud Initiatives

Dennis J. McGowan, CPA is the Vice President, Professional Practice and Anti-Fraud Initiatives at the Center for Audit Quality. In this role he leads regulatory and policy strategies that foster high-quality performance by public company auditors.

His duties include leading a team of audit executives to advance technical and policy-oriented projects to identify, develop, and seek consensus on issues affecting the public company auditing profession. McGowan is also responsible for overseeing the CAQ’s anti-fraud initiatives. This includes engaging with senior leaders across the financial reporting ecosystem, drafting comment letter responses to regulators, developing thought leadership publications, and responding to technical inquiries.

Dennis serves as a Board Member of Annapolis Pride, an organization dedicated to celebrating the LGBTQ+ community in Annapolis. Before joining the CAQ, he spent a decade at PwC, where he specialized in auditing clients in the financial services industry.

Dennis is a Certified Public Accountant licensed in Pennsylvania, and he holds a BS in Business Administration from La Salle University.

Dennis McGowan, CPA

In light of ongoing discussions around the critical audit matters (CAMs) communicated in PCAOB audit reports, the CAQ sought to better understand investors' understanding and use of CAMs. The results, institutional investors surveyed regularly use CAMs in their decision-making processes.
The...

In light of ongoing discussions around the critical audit matters (CAMs) communicated in PCAOB audit reports, <a href="http://thecaq.org/critical-audit-matters-survey-research-findings-q3-survey">the CAQ sought to better understand</a> investors' understanding and use of CAMs. The results, institutional investors surveyed regularly use CAMs in their decision-making processes.
<h3><strong>The Big Picture:</strong> <strong>What Are Critical Audit Matters (CAMs)?</strong></h3>
Taking a step back, CAMs are by definition any matter arising from the audit of the financial statements that was communicated or required to be communicated to the audit committee. The matter must also be one that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex auditor judgment. CAMs enable auditors to communicate in their auditor’s report those matters that were especially challenging, subjective, or complex during the audit of a company’s financial statements.

Communicating CAMs in the auditor’s report enables auditors to communicate directly with the user of the report, and can bridge the information gap between auditors and investors, providing investors with more information about the audit, likely in areas that would be of particular interest to them.

[custom_quote text="CAMs enable auditors to communicate in their auditor’s report those matters that were especially challenging, subjective, or complex during the audit of a company’s financial statements."]
<h3><strong>Zooming In: Investors’ Use of CAMs:</strong></h3>
After five years of auditor reporting that includes CAMs, there is some debate over the success of the new model, but <a href="https://www.thecaq.org/critical-audit-matters-survey-research-findings-q3-survey">recent CAQ research</a> appears to indicate that some benefits have been achieved.

Our survey found that investor respondents had strong positive feedback regarding CAMs.
<ul>
 	<li>Nearly all (93%) investors surveyed indicated that they read the CAMs section in 10-Ks of companies they invest in or are researching, and 78% indicated that they do so often.</li>
 	<li>92% of respondents indicated that they use CAMs in their investment decision-making process</li>
 	<li>93% said that, considering all the sources of information available to them, CAMs play a very important (53%) or somewhat important (40%) role in their analysis of potential investments.</li>
 	<li>Additionally, nine in ten investors stated that they are very satisfied (48%) or somewhat satisfied (42%) with the quality and clarity of CAMs disclosed in most audit reports, with only 2% of respondents expressing dissatisfaction.</li>
</ul>
Of the small number that expressed dissatisfaction with the quality and clarity of CAMs, they indicated that the language used to describe CAMs is not clear or overly complicated.

While satisfaction levels were high according to the survey, investor respondents did have some suggestions for ways in which CAMs could be improved.

More than half (58%) of investors surveyed indicated that they prefer to see more CAMs identified in an auditor’s report; and when asked what changes to CAMs would benefit their investment decisions, approximately half of respondents shared that both increasing the number of CAMs (52%) and increasing the detail provided in CAMs (51%) would be beneficial. Twenty-five percent of respondents also felt that requiring CAMs related to specific audit areas would be advantageous, but there was no consensus regarding the specific areas in which required subject matter specific CAMs were desired.

When asked to rank which information related to CAMs respondents do or would find most important to their investment decisions, the most selected responses were the inherent risk associated with the CAM (50% of respondents ranked as 1 or 2) and the topic/area of the CAM (46% of respondents ranked as 1 or 2). This feedback was interesting, as the topic area of the CAM is something that is currently required to be disclosed, but the inherent risk associated with the CAM is not required and is not frequently included in auditor’s reports today.

The results of our survey suggest that CAMs are understood and provide value to investors. As one investor wrote, “I find audit transparency critical to assessing a company’s financial health. CAMs can reveal the most complex or judgmental areas of an audit, which helps me identify potential risk points.”

While CAMs will continue to evolve to meet investors’ information needs, it is gratifying to see evidence that the efforts of standard setters and auditors to increase transparency around the audit process with the communication of CAMs is benefiting the capital markets.

[custom_quote text="I find audit transparency critical to assessing a company’s financial health. CAMs can reveal the most complex or judgmental areas of an audit, which helps me identify potential risk points."]
<h3></h3>

Unveiling the Value of Critical Audit Matters (CAMs) for Investors

Auditors

Audit Quality

Blog Post

sproul-becky-2020-1

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Sproul, Becky 2020 (1)

Becky Sproul

Talent and Culture Officer – Audit, KPMG US

I’m Becky Sproul, Audit Talent and Culture Officer at KPMG US and I’m sharing how my background has shaped who I am today, personally and professionally. Hispanic Heritage Month is a time to celebrate the achievements and contributions of Hispanic...

I’m Becky Sproul, Audit Talent and Culture Officer at KPMG US and I’m sharing how my background has shaped who I am today, personally and professionally. Hispanic Heritage Month is a time to celebrate the achievements and contributions of Hispanic and Latino Americans while reflecting on the profound impact of our diverse backgrounds. As a first-generation Cuban American, I am grateful for my family's support in shaping the leader I am today, instilling me with strong values and fueling my passion for diversity and inclusion.
<h3><strong>Shaping leadership through family support
</strong></h3>
My cultural background has significantly influenced my educational and career journey, grounding me in the values of hard work, perseverance and family support. These values have been instrumental in my accounting career, where attention to detail is crucial for precision and accuracy. Moreover, my family's strong work ethic and the emphasis on integrity have become essential qualities in my professional life.

These factors have driven me to pursue higher education and excel in my accounting career, while also instilling in me a deep sense of responsibility to give back and create opportunities for others.

[custom_quote text="My family's strong work ethic and the emphasis on integrity have become essential qualities in my professional life."]
<h3><strong>Giving back to the Hispanic community
</strong></h3>
<img class=" wp-image-15450 alignright" src="https://www.thecaq.org/wp-content/uploads/2024/09/2024_09_AiA_Becky-Sproul.png" alt="" width="300" height="188" />In my accounting career, I have actively given back to the Hispanic community. I serve as an audit committee member for the United Way of Miami-Dade and as a board member of The PhD Project. I am also a member of the Business Dean’s Council at Florida International University. Through these roles, I am able to leverage my accounting skills to support organizations dedicated to serving and uplifting the Hispanic community.

I have experienced several proud moments in my career that have brought me immense joy. Being featured on ALPFA Inc's Latinas to Watch List has highlighted the impact I have made as a Latina professional. Additionally, my active involvement in the Hispanic/Latino Network (Somos KPMG) and the KPMG Network of Women has allowed me to contribute to the advancement and empowerment of diverse professionals. This reinforces the importance of representation and leadership within the Hispanic community.

[custom_quote text="Being featured on ALPFA Inc's Latinas to Watch List has highlighted the impact I have made as a Latina professional."]
<h3><strong>Overcoming challenges
</strong></h3>
Although I have achieved career success through conventional means, I have encountered challenges in balancing my cultural identity with the expectations and norms of a corporate environment. In addition, I found that at certain stages of my career, there was a lack of representation and role models that shared my background. However, through determination and perseverance, I have overcome biases and demonstrated my capabilities. These experiences have taught me the significance of resilience and self-advocacy in attaining success.

During Hispanic Heritage Month, let's embrace diversity in our communities and workplaces, working together to create a more inclusive and equitable society. Let's uplift and empower one another, celebrating the achievements and contributions of Hispanic and Latino Americans every day, not just during this month.

[custom_quote text="Let's embrace diversity in our communities and workplaces, working together to create a more inclusive and equitable society."]

Celebrating Hispanic Heritage Month: Embracing Diversity, Leadership and Community

Hosted by Julie Bell Lindsay, CEO of the Center for Audit Quality, Capital Markets Pulse dives into the latest key matters related to the capital markets featuring experts from across the corporate reporting world.

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Hosted by Julie Bell Lindsay, CEO of the Center for Audit Quality, Capital Markets Pulse dives into the latest key matters related to the capital markets featuring experts from across the corporate reporting world.

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Podcast | Capital Markets Pulse, Episode 9: Paul Munter

Policymakers

Investors

Podcast

Hosted by Julie Bell Lindsay, CEO of the Center for Audit Quality, Capital Markets Pulse dives into the latest key matters related to the capital markets featuring experts from across the corporate reporting world.

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Podcast | Capital Markets Pulse, Episode 8: Richard Jackson

Manager, Professional Practice

Erin Cromwell, CPA is a Manager, Professional Practice at the Center for Audit Quality. Joining the CAQ in 2022, Cromwell manages and supports technical and policy-oriented projects through working groups and task forces with senior audit leaders.

Prior to joining the CAQ, Cromwell worked in KPMG’s audit practice, focusing on both integrated and non-integrated audit engagements for companies in the telecommunications and aerospace and defense industries. She also spent time with KPMG’s environmental, social, and governance (ESG) team, KPMG IMPACT, focusing on ESG attestation and other non-audit services for audit clients.

Cromwell is a Certified Public Accountant in Virginia and holds a bachelor’s degree in accounting from the University of Richmond.

Erin Cromwell, CPA

The increased integration of generative AI (genAI) in organizations’ financial reporting processes is raising important questions about when and how to invest in appropriate technologies that may have an impact on the speed of transformation and the respective organization’s functions....

The increased integration of generative AI (genAI) in organizations’ financial reporting processes is raising important questions about when and how to invest in appropriate technologies that may have an impact on the speed of transformation and the respective organization’s functions. With these changes, how can audit committees exercise oversight responsibilities effectively?

<a href="https://www.thecaq.org/audit-committee-practices-report-2024">A recent joint CAQ survey of audit committees</a> found that 33% of audit committee respondents indicated that finance transformation is one of the top three priorities for their audit committee in the next 12 months. As companies explore the transformative potential of genAI, the role of audit committees is also expanding with new oversight responsibilities.

The CAQ has recently published <a href="https://www.thecaq.org/ac-oversight-in-the-age-of-genai">Audit Committee Oversight in the Age of Generative AI</a> as a resource for audit committees navigating these uncharted waters.
<h3><strong>The Role of Audit Committees</strong></h3>
GenAI’s transformative potential for business processes, including financial reporting, creates exciting opportunities to enhance efficiency, generate new content, and obtain greater insights. However, this technology is not without risks and audit committees can play an important role in overseeing the governance of genAI and understanding its impact on the company’s financial reporting and internal control over financial reporting and the external audit. Audit committees are well-positioned to effectively exercise their oversight given their experience with financial reporting, enterprise risk management, and other emerging topics.
<h3><strong>What is GenAI?</strong></h3>
Audit committees of companies that are deploying genAI should have a foundational understanding of how genAI works and the benefits and risks that may arise from its use. GenAI is a subset of AI that is based on probabilistic technology that can create content, including text, images, audio, or video when prompted by a user. GenAI creates responses using algorithms that are often trained on open-source information, such as text and images from the internet. AI chatbots, like ChatGPT and Copilot, are well-known examples.

Audit committees should be aware that the probabilistic nature of genAI is a key distinction from other technologies that may have historically been used in a company’s financial reporting processes. To this end, genAI technologies are especially helpful for tasks that need creativity or diversity of responses, including generating new content or information, but they may not always provide reliable or repeatable outputs. GenAI technologies do not work like search engines finding facts within their training data but are instead creating new coherent, human-like text. Consequently, human oversight is needed to ensure the accuracy of information generated by genAI.

[custom_quote text="Audit committees should be aware that the probabilistic nature of genAI is a key distinction from other technologies that may have historically been used in a company’s financial reporting processes."]
<h3><strong>Overseeing Management</strong></h3>
A key focus of the audit committee’s oversight will likely be management’s approach to the oversight and governance of genAI. Establishing policies and procedures regarding acceptable use of genAI and assigning responsibility for the technology are foundational for successfully managing the use of genAI throughout the company. To help navigate conversations with management, audit committees may consider posing questions, including:
<ul>
 	<li>Does the company have the requisite expertise to select, develop, deploy, and monitor genAI technologies?</li>
 	<li>What are the company’s objectives and related success criteria for deploying genAI technologies? Are genAI technologies intended to augment or automate existing processes?</li>
 	<li>Who (individual or group) in the company is responsible for oversight of the use of genAI?</li>
 	<li>Has management established policies regarding the acceptable and ethical use of genAI?</li>
 	<li>Does the company have a process to track and monitor the use of genAI throughout the company, including use by third-party service providers?</li>
 	<li>How does the company track risks arising from the use of genAI technologies and mitigating responses?</li>
</ul>
Data privacy and security will also likely be a key focus area for audit committees. Maintaining the confidentiality of the company’s data, particularly data used in the financial reporting process, should be top of mind when selecting genAI technologies and developing policies regarding the acceptable use of those technologies. Further, the use of genAI technologies can introduce new cybersecurity risks to the company. Appropriate safeguards should be implemented protect against malicious threats.

Through the audit committee’s oversight of the financial reporting process, the audit committee should also understand how genAI technologies are integrated into relevant processes, how those technologies are selected, tested, and monitored, and how the company provides training and guidance to employees to promote consistent and effective use.

[custom_quote text="The use of genAI technologies can introduce new cybersecurity risks to the company. Appropriate safeguards should be implemented protect against malicious threats."]
<h3><strong>Overseeing the External Auditor</strong></h3>
The audit committee’s oversight of the external auditor is one of its core responsibilities and directly contributes to audit quality. Active and engaged audit committees have open dialogue with the external auditor on matters critical to the audit, which would likely include discussion to understand how the company’s use of genAI in financial reporting processes or internal control over financial reporting impacts the auditor’s risk assessment and planned audit approach.

Audit committees can use some of the following questions to better understand how the auditor plans to respond to the company’s use of genAI
<ul>
 	<li>What is the experience of the engagement partner and other senior engagement team members with genAI technologies? Would the firm be able to supplement the engagement team’s expertise if necessary (e.g., by engaging qualified specialists)?</li>
 	<li>What is the auditor’s understanding of the financial reporting implications of the company’s use of genAI technologies?</li>
 	<li>How has the impact of the company’s use of genAI technologies been considered during the auditor’s risk assessment process?</li>
 	<li>Does the company’s use of genAI technologies have a significant impact on the planned audit scope?</li>
 	<li>Has the auditor identified any fraud risks related to the company’s use of genAI technologies? How has the auditor addressed such risks in the audit?</li>
</ul>
When it comes to the transformative power of genAI and its integration into the financial reporting process, audit committees play a crucial role. Effective oversight by strong, active, knowledgeable, and independent audit committees significantly furthers the collective goal of providing high-quality, reliable financial information in the capital markets.

Explore our resource, <a href="https://www.thecaq.org/ac-oversight-in-the-age-of-genai">Audit Committee Oversight in the Age of Generative AI</a>, for more detail on how audit committees can effectively exercise their oversight responsibilities related to the use of genAI.

As genAI evolves and becomes a component of how financial reporting professionals operate, the CAQ will continue to monitor its impact on our profession and beyond. To get the latest insights, explore our <a href="https://www.thecaq.org/resource-hub">resources</a> and subscribe to our newsletters to learn more.

[custom_quote text="Effective oversight by strong, active, knowledgeable, and independent audit committees significantly furthers the collective goal of providing high-quality, reliable financial information in the capital markets."]

The Age of Generative AI: How Audit Committees Can Respond

Audit Committee

Emerging Reporting Areas

Audit Committee Effectiveness: A Webinar Series | Episode 7
Welcome to Audit Committee Effectiveness: a webinar series brought to you by the Center for Audit Quality and the National Association of Corporate Directors. The series explores key takeaways and insights from...

<h4>Audit Committee Effectiveness: A Webinar Series | Episode 7</h4>
<em>Welcome to Audit Committee Effectiveness: a webinar series brought to you by the Center for Audit Quality and the National Association of Corporate Directors. The series explores key takeaways and insights from leaders in the financial reporting ecosystem alongside resources developed to aid audit committees and public company board members. Stay tuned to this page for information about topics, participants, and how to register for upcoming webinars.</em>

<img class=" wp-image-12997 alignnone" src="https://thecaq.wpenginepowered.com/wp-content/uploads/2022/11/CAQ_NACD_400x150.png" alt="CAQ NACD" width="200" height="75" />

In our initial AI 101 for Audit Committees <a href="https://www.thecaq.org/artificial-intelligence-ai-101-for-audit-committees">webinar</a>, we tackled how recent advancements, powered by the likes of OpenAI’s ChatGPT and Google’s Gemini, has captured the attention of corporate leaders around the world.  Corporate boards are focusing on better understanding the technology and establishing guardrails to ensure risks of information security, data quality, hallucinations, and other areas are appropriately managed.

Now, in the second of a 2-part series, speakers <a href="https://www.ey.com/en_us/people/richard-jackson">Richard Jackson</a> (Global Artificial Intelligence Assurance Leader, EY) and <a href="https://www.linkedin.com/in/hrncirik/">Cory Hrncirik</a> (Modern Finance Lead, Microsoft) join us again with <a href="https://www.nacdonline.org/philadelphia/philadelphia-leadership/tom-petro/">Tom Petro</a> (Managing Partner, Capital Partners &amp; Audit Committee Member) to discuss how things have evolved in just the past 8 months.

We’ll discuss the evolving role of the audit committee, including oversight of both management and the external auditor. We’ll dive into such questions as:
<ul>
 	<li>Does the company have the requisite expertise to select, develop, deploy, and monitor genAI technologies?</li>
 	<li>Who (individual or group) in the company is responsible for oversight of the use of genAI?</li>
 	<li>Does the company have a process to track and monitor the use of genAI throughout the company, including use by third-party service providers?</li>
 	<li>What is the auditor’s understanding of the financial reporting implications of the company’s use of genAI technologies?</li>
 	<li>Does the company’s use of genAI technologies have a significant impact on the planned audit scope?</li>
 	<li>Has the auditor identified any fraud risks related to the company’s use of genAI technologies? How has the auditor addressed such risks in the audit?</li>
</ul>
<strong><em>Note</em></strong><em>: CPE available only to participants who joined the live webcast. </em>

<em>See the CAQ’s resources for more information: <a href="https://www.thecaq.org/wp-content/uploads/2024/04/caq_auditing-in-the-age-of-generative-ai__2024-04.pdf">Auditing in the Age of Generative AI</a> and  <a href="https://www.thecaq.org/ac-oversight-in-the-age-of-genai">Audit Committee Oversight in the Age of Generative AI</a>.</em>

Artificial Intelligence (AI) 101 For Audit Committees - Part II

Webinar

Event

This hour-long webcast will showcase emerging issues facing public companies and their auditors. It will feature Christine Gunia, Director of the PCAOB’s Division of Registration and Inspections, and representatives from the public company auditing profession. Panelists will discuss PCAOB inspection...

This hour-long webcast will showcase emerging issues facing public companies and their auditors. It will feature Christine Gunia, Director of the PCAOB’s Division of Registration and Inspections, and representatives from the public company auditing profession. Panelists will discuss PCAOB inspection findings and areas of focus as well as audit firm best practices.

<em><strong>Note</strong>: CPE available only to participants who join the live webcast.</em>

Audit Insider Webinar | October 2024

Audit Committee Effectiveness: A Webinar Series | Episode 6
Welcome to Audit Committee Effectiveness: a webinar series brought to you by the Center for Audit Quality and the National Association of Corporate Directors. The series explores key takeaways and insights from...

<h4>Audit Committee Effectiveness: A Webinar Series | Episode 6</h4>
<em>Welcome to Audit Committee Effectiveness: a webinar series brought to you by the Center for Audit Quality and the National Association of Corporate Directors. The series explores key takeaways and insights from leaders in the financial reporting ecosystem alongside resources developed to aid audit committees and public company board members. Stay tuned to this page for information about topics, participants, and how to register for upcoming webinars.</em>

<img class=" wp-image-12997 alignnone" src="https://thecaq.wpenginepowered.com/wp-content/uploads/2022/11/CAQ_NACD_400x150.png" alt="CAQ NACD" width="200" height="75" />

Enterprise Risk Management (ERM) is essential for audit committee members, offering insights into identifying, assessing, and mitigating risks that impact organizational objectives. Join the CAQ, NACD and our panel of experts for a discussion on how audit committees can fulfill their oversight responsibilities related to ERM through the lens of frameworks, regulatory expectations, and best practices for effective risk oversight. Participants will learn how to enhance risk reporting, improve decision-making, and ensure alignment with strategic goals.

<em><strong>Note</strong>: CPE available only to participants who joined the live webcast.</em>

Enterprise Risk Management for Audit Committees

This hour-long webcast will showcase regulatory and practice developments of interest to public companies and their auditors. Panelists include staff from the SEC’s Division of Corporation Finance and the SEC’s Office of the Advocate for Small Business Capital Formation. Panelists...

This hour-long webcast will showcase regulatory and practice developments of interest to public companies and their auditors. Panelists include staff from the SEC’s Division of Corporation Finance and the SEC’s Office of the Advocate for Small Business Capital Formation. Panelists will discuss comments issued on SEC filings and lessons learned from the 2023 reporting cycle. Panelists will also discuss the role of the Office of the Advocate for Small Business Capital Formation, including the resources they offer small businesses and the firms that serve them.

<em><strong>Note</strong>: CPE available only to participants who joined the live webcast.</em>

Audit Insider Webinar | July 2024

Audit Committee Effectiveness: A Webinar Series | Episode 5
Welcome to Audit Committee Effectiveness: a webinar series brought to you by the Center for Audit Quality and the National Association of Corporate Directors. The series explores key takeaways and insights from...

<h4>Audit Committee Effectiveness: A Webinar Series | Episode 5</h4>
<em>Welcome to Audit Committee Effectiveness: a webinar series brought to you by the Center for Audit Quality and the National Association of Corporate Directors. The series explores key takeaways and insights from leaders in the financial reporting ecosystem alongside resources developed to aid audit committees and public company board members. Stay tuned to this page for information about topics, participants, and how to register for upcoming webinars.</em>

<img class=" wp-image-12997 alignnone" src="https://thecaq.wpenginepowered.com/wp-content/uploads/2022/11/CAQ_NACD_400x150.png" alt="CAQ NACD" width="200" height="75" />

Join us for a discussion about the <a href="https://www.thecaq.org/audit-committee-practices-report-2024">third edition of the Audit Committee Practices Report</a>, a collaboration between Deloitte’s Center for Board Effectiveness and the Center for Audit Quality. Based on survey findings, this webinar offers audit committee members and those who work with them an opportunity to hear about committee priorities, challenges, and opportunities, as well as leading practices around audit committee effectiveness.

<em><strong>Note</strong>: CPE available only to participants who joined the live webcast.</em>

2024 Audit Committee Practices Report Webinar

Washington DC, September 26, 2024 – Kathleen Casey, Senior Advisor at Patomak Global Partners, a leading strategy, risk management, and compliance consultancy, joined the CAQ's Governing Board, effective September 26, 2024.

Casey brings decades of financial policy experience, previously serving as...

<strong>Washington DC, September 26, 2024</strong> – Kathleen Casey, Senior Advisor at Patomak Global Partners, a leading strategy, risk management, and compliance consultancy, joined the CAQ's Governing Board, effective September 26, 2024.

Casey brings decades of financial policy experience, previously serving as an SEC Commissioner from 2006 to 2011, where she acted as the SEC’s principal representative in multilateral and bilateral regulatory dialogues, the G-20 Financial Stability Board, and the International Organization of Securities Commissions (IOSCO). Casey focuses on financial markets policy, regulatory compliance and risk management, corporate governance, international regulatory developments, and enforcement in her current role.

“We’re pleased to welcome Kathy to the Board,” said Julie Bell Lindsay, Chief Executive Officer, CAQ. “Her financial policy expertise will be invaluable to the CAQ and the public company audit profession as we navigate new standards and regulations that are arising as a result of the evolving corporate reporting landscape.”

“I’m pleased to join CAQ’s Governing Board and support their important efforts to advance the CAQ’s public interest objectives of enhancing the quality, credibility and transparency of public company audits,” said Casey. “I look forward to working with the Board to address topics vital to audit quality and the future of the profession."

The CAQ’s Governing Board is comprised of a variety of leaders representing the financial reporting ecosystem, including chief executive officers from some of the largest public company audit firms, the American Institute of CPAs, as well as independent board members from stakeholder communities.

+++

<strong>About the Center for Audit Quality
</strong>The CAQ champions the public interest in the capital markets by:
<ul>
 	<li>Elevating the quality, credibility, and transparency of public company audits;</li>
 	<li>Advancing critical issues affecting public company audits;</li>
 	<li>Driving innovation in assurance; and</li>
 	<li>Providing a collaborative forum for capital market stakeholders to address evolving needs and challenges.</li>
</ul>
As the voice of the public company audit profession, we work to instill trust in corporate reporting and the integrity of the auditing process, ultimately empowering investors, companies, and society as a whole.

<strong>Contact:</strong>
Brad Jacklin
Director of Communications
Bjacklin@thecaq.org
(202)-494-9560

Patomak Global Partners’ Kathleen Casey Joins CAQ Governing Board

Press Releases

Washington DC, June 17, 2024 – The CAQ Governing Board elected Brian Becker, Managing Partner and CEO, RSM US LLP (RSM), as the new Vice Chairman of the Governing Board, effective June 14, 2024.

Becker oversees the firm’s strategy and operations...

<strong>Washington DC</strong>, <strong>June 17, 2024</strong> – The CAQ Governing Board elected Brian Becker, Managing Partner and CEO, RSM US LLP (RSM), as the new Vice Chairman of the Governing Board, effective June 14, 2024.

Becker oversees the firm’s strategy and operations across four countries—the United States, Canada, El Salvador and India. Becker is driving RSM to become a digital firm and is committed to advancing the firm’s inclusive culture, as well as to continuing its longstanding history of stewardship.

“With his extensive experience and long-standing dedication to the profession, Brian will be essential to the CAQ as we work to instill trust in corporate reporting and the integrity of the auditing process,” said Julie Bell Lindsay, Chief Executive Officer, Center for Audit Quality.

“In this time of accelerating change for the auditing profession, the CAQ’s mission of enhancing trust and transparency is more important than ever,” said Becker. “I look forward to continuing to serve on the Board in the role of Vice Chair as we address the challenges and opportunities that lie ahead.”

Becker succeeds Wayne Berson, Chief Executive Officer, BDO USA and Chairman, BDO International. “I also want to extend our gratitude to Wayne for his time and energy as Vice Chair of our Governing Board since 2019. With his vision and leadership, Wayne has been an essential driver of our goals and commitment to strengthening the work of public company auditors,” said Lindsay.

The CAQ’s Governing Board is comprised of a variety of leaders representing the financial reporting ecosystem, including chief executive officers from some of the largest public company audit firms, the American Institute of CPAs, as well as independent board members from investor, board member and issuer communities.

<strong>About the Center for Audit Quality
</strong>
The CAQ champions the public interest in the capital markets by:
<ul>
 	<li>Elevating the quality, credibility, and transparency of public company audits;</li>
 	<li>Advancing critical issues affecting public company audits;</li>
 	<li>Driving innovation in assurance; and</li>
 	<li>Providing a collaborative forum for capital market stakeholders to address evolving needs and challenges.</li>
</ul>
As the voice of the public company audit profession, we work to instill trust in corporate reporting and the integrity of the auditing process, ultimately empowering investors, companies, and society as a whole.

<strong>Contact:</strong>
Brad Jacklin
Director of Communications
Bjacklin@thecaq.org
(202)-494-9560

RSM CEO Brian Becker Elected as New Vice Chair of CAQ Governing Board

Preparers/Issuers

Company Management

Washington DC, April 2, 2024 – Paul Knopp, KPMG U.S. Chair and CEO, has been elected Chair of the CAQ’s Governing Board, effective April 1, 2024.

The CAQ’s Governing Board is comprised of a variety of leaders representing the financial reporting...

<strong>Washington DC, April 2, 2024 – </strong>Paul Knopp, KPMG U.S. Chair and CEO, has been elected Chair of the CAQ’s Governing Board, effective April 1, 2024.

The CAQ’s Governing Board is comprised of a variety of leaders representing the financial reporting ecosystem, including chief executive officers from some of the largest public company audit firms, the American Institute of CPAs, as well as independent board members from investor, board member and issuer communities. The Governing Board oversees the CAQ’s strategic agenda and activities.

“The financial reporting landscape is constantly evolving, creating new challenges and opportunities for the public company audit profession,” said Julie Bell Lindsay, Chief Executive Officer, CAQ. “With his extensive experience serving large, multinational clients as an audit partner and his leadership and long-standing dedication to the profession as the Chair and CEO at KPMG,  Paul will be essential to the CAQ as we fulfill our mission of supporting high-quality financial reporting, convening capital market stakeholders to advance discussions on audit quality issues and championing policies and standards that bolster and support audits.”

“With rapidly emerging technologies such as generative AI, new corporate reporting areas including new climate disclosure rules and a need to strengthen the talent pipeline for the future, now is a transformative time for the public company audit profession,” said Knopp. “I look forward to supporting the CAQ in executing their strategic agenda and supporting the profession as it embraces the future of financial reporting while maintaining a laser focus on investor protection through high-quality audits.”

Knopp succeeds Tim Ryan, US Senior Partner at PwC. “Tim has been instrumental in leading the CAQ to help address some of the most important issues impacting our profession, from the talent pipeline to helping the profession lead the way in emerging areas of corporate reporting like climate and cybersecurity,” said Lindsay.

<strong>About the Center for Audit Quality</strong>

The Center for Audit Quality (CAQ) is a nonpartisan public policy organization serving as the voice of US public company auditors and matters related to the audits of public companies. The CAQ promotes high-quality performance by US public company auditors; convenes capital market stakeholders to advance the discussion of critical issues affecting audit quality, US public company reporting, and investor trust in the capital markets; and using independent research and analyses, champions policies and standards that bolster and support the effectiveness and responsiveness of US public company auditors and audits to dynamic market conditions.

KPMG U.S. Chair and CEO Paul Knopp to Helm CAQ’s Governing Board

Two-thirds of audit committee members see opportunities to improve effectiveness,
 according to Deloitte, Center for Audit Quality Survey
NEW YORK, March 12, 2024 —The “Audit Committee Practices Report: Common Threads Across Audit Committees,” a joint effort between Deloitte’s Center for Board Effectiveness...

<p style="text-align: center;"><em>Two-thirds of audit committee members see opportunities to improve effectiveness,</em></p>
<p style="text-align: center;"><em> according to Deloitte, Center for Audit Quality Survey</em></p>
<strong>NEW YORK, March 12, 2024 —</strong>The “Audit Committee Practices Report: Common Threads Across Audit Committees,” a joint effort between Deloitte’s Center for Board Effectiveness and the Center for Audit Quality (CAQ), identified cybersecurity as the top priority in the next 12 months.

A total of 266 respondents participated in this year’s survey, most of whom are from US public companies (74%), and of which 81% have more than $700 million in market cap.

Respondents cited enterprise risk management (ERM) as the No. 2 priority, demonstrating a broader, more holistic view of risk. Meanwhile, trending topics like artificial intelligence (AI) governance and environmental, social and governance (ESG) reporting are receiving comparably less attention.

“We are seeing the role of the audit committee continue to evolve and adapt as demands on oversight responsibilities change with the business environment and investor expectations,” said Vanessa Teitelbaum, senior director, Professional Practice at CAQ. “Audit committees are zeroed in on one of their core responsibilities: overseeing enterprise risk programs at large. While their agenda continues to grow and expand, key areas like cybersecurity and ERM remain a central focus.”

In addition to cybersecurity and ERM, finance and internal audit talent (a new entry in this year’s survey), compliance with laws and regulations, and finance transformation rounded out the top five priorities. Although the majority of respondents view internal audit as an effective function — one that adds demonstrable value — nearly 80% believe there is an opportunity for internal audit to add even more value. Audit committees are also increasingly prioritizing compliance with laws and regulations, with more than one-third citing it as a top-three priority, a significant increase from last year.

<strong>Cybersecurity remains No. 1 priority for audit committees, followed by ERM</strong>

Cybersecurity topped the list of committee priorities by nearly 20 percentage points over ERM. Notably, 58% of respondents said the audit committee has primary oversight over cybersecurity, with 25% indicating the full board has oversight responsibility. Sixty-nine percent of respondents highlighted cybersecurity as a top concern in the next 12 months, with 3-in-10 ranking it No. 1.

The heightened focus on cybersecurity is likely due to greater disclosure requirements from regulatory agencies. The U.S. Securities and Exchange Commission (SEC), for example, is requiring new disclosures on cybersecurity risks and incidents, as well as management and strategy, including an explanation of oversight processes.

When considering what additional expertise would enhance the audit committee's effectiveness, cybersecurity was highlighted as the top area (44%). This is particularly notable given that almost half (48%) of respondents said they have some level of cybersecurity expertise on the committee.

The evolving risk landscape and emerging risks have put an increased spotlight on ERM. Nearly half of respondents indicated that ERM will be a top focus area in the next 12 months. More than three quarters (85%) of respondents reported some level of ERM expertise on the audit committee, positioning it to effectively oversee management’s risk programs.

<strong>Opportunities for audit committees to increase effectiveness </strong>

With a growing agenda and evolving responsibilities, audit committee members see an opportunity for continuous learning and improvement and have perspectives on how they could enhance their effectiveness. Only one-third of respondents say the committee is effective as is, while the rest feel there is at least one strategy that could boost general effectiveness. Those respondents highlighted three key areas for improvement:
<ul>
 	<li>Increased discussion and/or engagement from members during meetings — highlighted by 29% of respondents.</li>
 	<li>Improved quality of pre-read materials — highlighted by 28% of respondents.</li>
 	<li>Improved quality of presentations during meetings — highlighted by 26% of respondents.</li>
</ul>
“The effectiveness of an audit committee can be distinguished by how it executes its responsibilities,” said Krista Parsons, Audit &amp; Assurance managing director, Audit Committee Program leader, and Governance Services leader at Deloitte’s Center for Board Effectiveness. “Key to this is including the right topics on the agenda, obtaining information that enhances comprehension of these issues, and fostering candid and transparent discussions. These are among the actions that audit committee members can take to be prepared for the issues facing them today and in the future."

<strong>About the survey</strong>

This edition of the “Audit Committee Practices Report,” like prior editions, is based on a survey of audit committee members. A total of 266 respondents participated in this year’s survey, most of whom are from US public companies (74%) and of which 81% have more than $700 million in market cap.

In its third year, the Audit Committee Practices Report added a charitable element to the survey, allowing the first 200 qualifying respondents to select from <a href="https://braven.org/">Braven</a> and/or <a href="https://www.newprofit.org/">New Profit</a> for a $100 donation. This led to a total of $20,000 in donations, allocated per respondent selections.

<strong>About the Center for Audit Quality</strong>

The Center for Audit Quality (CAQ) is a nonpartisan public policy organization serving as the voice of US public company auditors and matters related to the audits of public companies. The CAQ promotes high-quality performance by US public company auditors; convenes capital market stakeholders to advance the discussion of critical issues affecting audit quality, US public company reporting, and investor trust in the capital markets; and using independent research and analyses, champions policies and standards that bolster and support the effectiveness and responsiveness of US public company auditors and audits to dynamic market conditions.

<strong>About Deloitte’s Center for Board Effectiveness</strong>

Deloitte’s Center for Board Effectiveness helps directors deliver value to the organizations they serve through a portfolio of high-quality, innovative experiences throughout their tenure as board members. Whether an individual is aspiring to board participation or has extensive board experience, the Center’s programs enable them to contribute effectively and provide focus in the areas of governance and audit, strategy, risk, innovation, compensation and succession.

<strong>About Deloitte</strong>
Deloitte provides industry-leading audit, consulting, tax and advisory services to many of the world’s most admired brands, including nearly 90% of the Fortune 500® and more than 8,500 US-based private companies. At Deloitte, we strive to live our purpose of making an <a href="https://www2.deloitte.com/us/en/pages/about-deloitte/articles/purpose-at-deloitte-us.html">impact that matters</a> by creating trust and confidence in a more equitable society. We leverage our unique blend of business acumen, command of technology, and strategic technology alliances to advise our clients across industries as they <a href="https://www2.deloitte.com/us/en/pages/about-deloitte/articles/technology-consulting-engineering-advantage.html">build their future</a>. Deloitte is proud to be part of the largest global professional services network serving our clients in the markets that are most important to them. Bringing more than 175 years of service, our network of member firms spans more than 150 countries and territories. Learn how Deloitte’s approximately 457,000 people worldwide connect for impact at <a href="http://www.deloitte.com">www.deloitte.com</a>.

###

<strong>Contacts</strong>
<table>
<tbody>
<tr>
<td width="230">Kerry Lee</td>
<td width="262">Brad Jacklin</td>
</tr>
<tr>
<td width="230">Senior Manager, Public Relations</td>
<td width="262">Director, Communications</td>
</tr>
<tr>
<td width="230">Deloitte Services LP</td>
<td width="262">Center for Audit Quality</td>
</tr>
<tr>
<td width="230">+1 916-298-8031</td>
<td width="262">+1 202 494 9560</td>
</tr>
<tr>
<td width="230">kerlee@deloitte.com</td>
<td width="262">bjacklin@thecaq.org</td>
</tr>
</tbody>
</table>
&nbsp;

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. In the United States, Deloitte refers to one or more of the US member firms of DTTL, their related entities that operate using the “Deloitte” name in the United States and their respective affiliates. Certain services may not be available to attest clients under the rules and regulations of public accounting. Please see <a href="https://www2.deloitte.com/us/en/legal/about-deloitte.html">www.deloitte.com/about</a> to learn more about our global network of member firms.

Audit Committees Prioritize Cybersecurity, Enterprise Risk Management in New Survey

Transparency and accountability are pillars of effective public policy development. Unfortunately, the roundtable that the PCAOB held this week on its proposal related to company noncompliance with laws and regulations (NOCLAR) failed to live up to these principles. Specifically, the...

<span data-contrast="auto">Transparency and accountability are pillars of effective public policy development. Unfortunately, the roundtable that the PCAOB held this week on its proposal related to company noncompliance with laws and regulations (NOCLAR) failed to live up to these principles. Specifically, the roundtable failed to address the concerns outlined in 78% of the comment letters the PCAOB received, including from those investors, audit committee members, auditors, academics and others who are concerned with the PCAOB’s proposal. </span><span data-ccp-props="{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}"> </span>

<span data-contrast="auto">“Today’s NOCLAR roundtable was a missed opportunity for the PCAOB to further understand the views highlighted in numerous comment letters from engaged stakeholders,” said Julie Bell Lindsay, Chief Executive Officer, CAQ. “Not only did the roundtable surface disagreement as to the actual scope or intention of the proposal, but we are concerned that the lack of diverse stakeholder representation – particularly from investors and audit committees, two important audiences – resulted in dialogue that did not meaningfully address stakeholder concerns. Given the discussion at the roundtable, we believe that the appropriate response is to re-propose the standard, with an economic analysis, to begin to address these concerns.”</span><span data-ccp-props="{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}"> </span>

<span data-ccp-props="{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}"> </span>

Statement on the PCAOB’s NOCLAR Roundtable Event

Statements

Anti-Fraud

The Role of the Auditor: Assessing and Responding  to Fraud Risk provides insights into practices, tools, and considerations that can help auditors, especially those with less experience, enhance their professional skepticism and overall approach to assessing and responding to...

The Role of the Auditor: Assessing and Responding  to Fraud Risk

Publications

As part of the Center for Audit Quality’s (CAQ) ongoing effort to keep members and stakeholders informed on significant public policy and accounting matters, we are pleased to offer the Public Policy and Technical Alert (PPTA). Each month, the PPTA...

Public Policy and Technical Alert | August 2024

Newsletter

PPTA

Welcome to another edition of Capital Markets Pulse, a monthly newsletter from the Center for Audit Quality that brings you insights, resources, and tools on the latest issues impacting the capital markets

While temperatures have certainly cooled down here in Washington...

<img class="aligncenter wp-image-13866" src="https://thecaq.wpenginepowered.com/wp-content/uploads/2023/06/Header_JBL_1200x400_600x200_FINAL_Website.png" alt="Capital Markets Pulse with Julie Bell Lindsay" width="650" height="163" />

<strong>Welcome to another edition of Capital Markets Pulse</strong>, a monthly newsletter from the Center for Audit Quality that brings you insights, resources, and tools on the latest issues impacting the capital markets

While temperatures have certainly cooled down here in Washington D.C., the audit profession’s regulatory environment has not. We’re tracking several recent rules and proposals from the PCAOB, SEC, and other policymakers that will significantly impact the profession.

Speaking of rules, I had the opportunity to discuss the SEC’s final climate rule with the SEC’s Chief Accountant Paul Munter in the latest episode of our Capital Markets Pulse podcast. Mainly – what will this rule mean for assurance providers should the rule go forward?

Lastly, as students return to school for the 2024 – 2025 school year, we’re looking back at what Accounting+ accomplished over the previous school year through our strategic partnership with EVERFI in our annual Impact report.

I am incredibly proud of the work the CAQ team does on behalf of public company audit firms and the capital markets. Read on for what’s on my radar

<em>Please note that these perspectives are my own. If this email was forwarded to you, <a href="https://go.thecaq.org/l/834983/2020-04-22/fskb">subscribe here</a> so that you never miss a public company auditing update. </em> ​​​

<img class="wp-image-14496 aligncenter" src="https://www.thecaq.org/wp-content/uploads/2024/02/Header_JBL_1200x400_600x200_PODCAST_V2.png" alt="" width="600" height="150" />
<h3><strong>Discussing the SEC’s Final Climate Rule: Part 2 with SEC Chief Accountant Paul Munter</strong></h3>
Almost every company listed on the S&amp;P 500 now voluntarily reports some form of environmental, social or governance-related information, and that includes information related to climate risks and opportunities and their impact on the company’s strategy and results. Given the proliferation of this form of reporting, the SEC’s adoption of its climate-related disclosure rules in March was an important step that was designed to bring more clarity and consistency to company-reported climate information. Among other things, the rule requires that public companies obtain independent assurance over certain aspects of their climate disclosures.

In this episode, I met with Paul Munter, SEC Chief Accountant, to break down the key elements of the SEC’s final climate rule and implications for auditors and investors.

The following are a few highlights from Paul during our discussion:
<ul>
 	<li><strong>On why the SEC included an assurance component: </strong>We think that audits are a really important aspect of the financial reporting process. When there are high-quality audits provided around financial statement information, it improves the quality of information and improves investors’ confidence in the quality of information. Academic research supports this as well. As the Commission explained in the adopting release, obtaining assurance over the GHG emissions disclosures would also provide investors with an additional degree of reliability.</li>
 	<li><strong>On the most impactful elements of the rule for assurance providers: </strong>For assurance providers, I think it’s providing clarity in terms of what are acceptable assurance frameworks that could be used in providing assurance over Scope 1 or Scope 2 information. The Commission did provide for alternatives – AICPA has attestation standards, IAASB has attestation standards, both are working on assurance specific to GHG emissions. The PCAOB has attestation standards that can be used. Thinking about tradeoffs, if you look at the voluntary assurance landscape, a lot of that is being done by other service providers and a lot of that is being done subject to the ISO framework. So, we’re trying to provide sufficient flexibility to allow issuers to make an informed decision as to who would be an appropriate service provider and what kind of framework would be appropriate for their circumstance.</li>
 	<li><strong>On standardization and different jurisdictions:</strong> It’s really important to look at this through the lens of our remit, which is different than the remit and policy objectives in other jurisdictions. We are a disclosure agency; we are not an agency that tells management what they should or shouldn’t do. Rather, we tell management to disclose what they are doing or planning to do, and we are merit-neutral…While we certainly were informed by what’s going on elsewhere, given a number of our issuers are likely to be subject to requirements in Europe, California, and [other] jurisdictions around the world…we are focused on the investor population, which are those investors in our markets…we are trying to achieve our remit and our policy objectives, not those of others.</li>
</ul>
Listen to the <a href="https://www.thecaq.org/podcast-capital-markets-pulse-episode-9">podcast here</a>.

Be sure to subscribe to the latest episodes on <a href="https://open.spotify.com/show/0Eom56jIKUbXXufaJ98yBX">Spotify</a>, <a href="https://podcasts.apple.com/us/podcast/capital-markets-pulse/id1690673211">Apple Podcasts</a>, <a href="https://podcasts.google.com/feed/aHR0cHM6Ly9mZWVkcy5idXp6c3Byb3V0LmNvbS8yMTkyMjg2LnJzcw==">Google Podcasts</a>, or <a href="https://music.amazon.com/podcasts/a9d37ab7-2e09-4ce9-93a5-bc0399d25fae">Amazon Music</a>.

&nbsp;

<img class="aligncenter wp-image-13867" src="https://thecaq.wpenginepowered.com/wp-content/uploads/2023/06/Header_JBL_1200x400_600x200_RADAR-1024x256.png" alt="On my radar" width="600" height="150" />
<h2>Profession Updates</h2>
<h3><strong>PCAOB Releases Results of 2023 Audit Inspections </strong></h3>
The PCAOB recently released the results of inspections of all 2023 annually inspected firms, including the six U.S. global network firms.
<ul>
 	<li><strong>The not-so-good news: </strong>The latest round of inspection reports showed that deficiencies remain high and trended up slightly overall.</li>
 	<li><strong>Digging deeper:</strong> Despite the rise in overall deficiencies, Chair Wiliams said the results “point to some small signs of movement in the right direction.” Some of these signs include <a href="https://www.wsj.com/articles/big-four-auditing-deficiencies-level-off-in-latest-inspections-962f3142">stabilization in deficiency rates</a> among larger firms. Moreover, actual restatements remain incredibly low year over year (just three of 405 audits (0.74%) inspected in 2023 resulted in a restatement compared with two of 386 audits (0.52%) inspected in 2022).</li>
</ul>
What this means for audit quality: Audit quality is a continuous journey, and without question firms must do more to improve the deficiency rate. However, the results of these inspections and other indicators suggest that audit quality remains high. In a <a href="https://www.forbes.com/councils/forbesbusinesscouncil/2024/08/08/the-current-state-of-audits-ensuring-quality-and-accuracy/">recent piece</a> for Forbes, I expand on the indicators I use to understand the state of audit quality.
<h3><strong>SEC Votes to Approve New and Updated PCAOB Audit Standards and an Amendment to the PCAOB’s Contributory Liability Rule</strong></h3>
The SEC recently <a href="https://www.sec.gov/newsroom/press-releases/2024-100">voted to approve</a> a new standard, the PCAOB’s AS 1000, <em>General Responsibilities of the Auditor in Conducting an Audit</em>, aimed at addressing the general principles and responsibilities of the auditor, including due professional care, professional skepticism, competence, and professional judgment. <a href="https://www.thecaq.org/comment-letter-as-1000-general-responsibilities-of-the-auditor-in-conducting-an-audit-and-amendments-to-pcaob-standards">Based on</a> our initial reviews of the Final Standard, implementation resources will be necessary to promote consistent implementation and application of the new standard and amendments.

The SEC also approved amendments to AS 1105, Audit Evidence, and AS 2301, <em>The Auditor’s Response to the Risks of Material Misstatement</em>, which address the use of technology-assisted data analysis in audit procedures. Finally, the SEC approved, by a 3-2 vote of the Commission, the PCAOB’s amendment to Rule 3502, <em>Responsibility Not to Knowingly or Recklessly Contribute to Violations</em>, governing the liability of an associated person of a registered public accounting firm who directly and substantially contributes to that firm’s violations of the laws, rules, and standards that the PCAOB enforces.​​​​​​ Commissioner Peirce, who dissented, said, “This change is neither consistent with the requirements of the securities laws, nor necessary or appropriate in the public interest or for the protection of investors. It could have the unintended consequence of lowering audit quality and could worsen the trend toward fewer talented individuals entering the auditing profession.”

A <a href="https://www.thecaq.org/wp-content/uploads/2024/06/caq_comment-letter-analysis-pcaob-rule-3502_2024-06.pdf">CAQ analysis</a> of PCAOB comment letters found that many stakeholders support Commissioner Pierce’s view, agreeing that the amendments could have significant unintended consequences, including negative impacts on audit quality and impacts on the attractiveness of the profession.
<h3><strong>SEC to Hold Open Meeting on PCAOB Quality Control Standard</strong></h3>
The SEC recently announced an open meeting on September 9 to consider whether to approve the PCAOB’s new quality control standard, QC 1000, <em>A Firm’s System of Quality Control</em>, and related amendments, as adopted by the PCAOB. In <a href="https://www.thecaq.org/comment-letter-sec-qc-1000-a-firms-system-of-quality-control-and-other-amendments-to-pcaob-standards-rules-and-forms">our comment letter</a>, the CAQ expressed support for the PCAOB’s effort to strengthen audit practices but expressed concerns and questions about the final standard. Our concerns relate to the new External Quality Control Function (EQCF), which we believe requires further consideration by the PCAOB before a final quality control standard can be approved by the SEC.
<h3><strong>Senators Hickenlooper and Capito Introduce Bipartisan AI Assurance Bill </strong></h3>
As AI increasingly plays a role in society, regulators are thinking about responsible use. On the <a href="https://www.hickenlooper.senate.gov/press_releases/hickenlooper-capito-introduce-bipartisan-bill-to-create-guidelines-for-third-party-audits-of-ai/#:~:text=The%20VET%20AI%20Act%20would,in%20compliance%20with%20established%20guardrails.">Validation and Evaluation for Trustworthy Artificial Intelligence (VET AI) Act</a>, Senator Hickenlooper said, “AI is moving faster than any of us thought it would two years ago. But we have to move just as fast to get sensible guardrails in place to develop AI responsibly before it’s too late. Otherwise, AI could bring more harm than good to our lives.”

The bill would require NIST to conduct a study examining various aspects of the ecosystem of AI assurance, including the current capabilities and methodologies used, facilities or resources needed, and overall market demand for internal and external AI assurance.

A <a href="https://www.thecaq.org/audit-partner-pulse-survey-fall-2023">CAQ survey</a> found that one in three audit partners see companies in their primary industry sector deploying or planning to deploy AI in their financial reporting process. Learn more about the AI assurance landscape and how public company auditors can play a role:
<ul>
 	<li>​​​​​​<a href="https://www.thecaq.org/wp-content/uploads/2024/04/caq_auditing-in-the-age-of-generative-ai__2024-04.pdf">Auditing in the Age of Generative AI</a></li>
 	<li><a href="https://www.thecaq.org/podcast-capital-markets-pulse-episode-8">Capital Markets Pulse, Episode 8: The Opportunity of Generative AI and Responsible Governance with EY’s Richard Jackson</a></li>
</ul>
<h3><strong>PCAOB Hosts Forum on Auditing in the Small Business Environment and on Auditing Broker-Dealers </strong></h3>
On September 12, the PCAOB <a href="https://pcaobus.org/news-events/news-releases/news-release-detail/board-member-kara-stein-to-host-forum-for-auditors-of-small-businesses-and-auditors-of-broker-dealers-in-denver">will host</a> a forum aimed at providing information and resources to small firms or firms auditing broker-dealers.

The event comes at a time when smaller firms are reporting that they are struggling to keep up with the PCAOB’s standard-setting agenda. A <a href="https://www.ft.com/content/e8f8c45c-2050-4646-a717-cbd337ccbdbc">recent academic</a> study also finds that the PCAOB’s inspection process may disproportionately impact smaller audit firms. And the deficiency rate among broker-dealer audits was 70% in the PCAOB’s latest inspection reports, which may be driven by the complex nature of these audits and exacerbated by the current regulatory environment.

Small firms and broker-dealers interested in attending the event can <a href="https://pcaob.regfox.com/2024-denver-pcaob-small-business-and-broker-dealer-auditor-forum">register here</a>.
<h2>CAQ Updates</h2>
<h3><strong>Survey Finds Investor Support for Critical Audit Matters (CAMs)</strong></h3>
Beginning in 2019, the PCAOB required the auditor’s report to include critical audit matters (CAMs). CAMs are those matters communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex auditor judgment. By expanding the audit report to include CAMs, the PCAOB hoped to increase its relevance to financial statement users.

A recent survey of investors finds that the PCAOB accomplished its objective. According to the survey, 92% of investors say they rely on CAMs when making investment decisions. Further, 93% say that CAMs play an important role in their analysis of a potential investment.

The research demonstrates that investors value the addition of CAMs to the audit report. See the full report to learn more and find out what additional information investors want when it comes to CAMs: <a href="http://thecaq.org/critical-audit-matters-survey-research-findings-q3-survey">Critical Audit Matters Survey</a>.
<h2>Accounting+ Updates</h2>
<h3><strong>CAQ and EVERFI Release IMPACT Report </strong></h3>
Since 2023, Accounting+ has partnered with EVERFI, the nation’s leading social impact education innovator, on a first-of-its-kind digital education program, Accounting Careers: Limitless Opportunities. The program is designed to help high school students discover how accounting skills can help them achieve their career goals and to attract greater diversity and representation into the accounting profession.

Recently, Accounting+ and EVERFI released their 2023 – 2024 school year report with key results from the second year of the campaign. Highlights include:
<ul>
 	<li>Widespread adoption of the program by educators, with 5,600 educators incorporating program materials into their instruction.</li>
 	<li>During the 2023-2024 school year, Accounting Careers: Limitless Opportunities reached over 80,000 learners from all 50 states.</li>
 	<li>After the course, 70% of students said accounting skills are very or extremely valuable compared to 57% of students before the course.</li>
</ul>
Read the full report: <a href="https://thecaq.wpenginepowered.com/wp-content/uploads/2024/09/CAQ-EVERFI-IMPACT-REPORT_FINAL_2024.pdf">Accounting Careers: Limitless Opportunities 2023 – 2024 Impact Report</a>.

&nbsp;

<hr />

<h3 style="text-align: center;">Julie Bell Lindsay</h3>
<p style="text-align: center;"><em>Chief Executive Officer, CAQ</em></p>

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