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Discover how to combat financial fraud effectively with the Anti-Fraud Collaboration and the CAQ. Our resources emphasize four crucial themes in fraud prevention: promoting skepticism, fostering an ethical culture, risk management, and utilizing emerging technologies. Learn to detect and deter fraud more proficiently with our comprehensive guides and resources.

In an effort to engage capital market stakeholders and better understand their information expectations, the CAQ commissioned KRC Research to conduct qualitative research with institutional investors whose portfolio consists primarily of equities in North America, working in a range of...

In an effort to engage capital market stakeholders and better understand their information expectations, the CAQ commissioned KRC Research to conduct qualitative research with institutional investors whose portfolio consists primarily of equities in North America, working in a range of investment settings from family offices to pensions and large banks.

The research was primarily designed to:
<ul>
 	<li>Understand what information institutional investors seek regarding public company auditing and the audit process, and</li>
 	<li>Explore attitudes toward potential standards and regulations related to additional reporting or audit requirements.</li>
</ul>
This research was also commissioned to understand how institutional investors perceive the state of corporate reporting and what they are looking for when it comes to existing and emerging types and sources of information.

<a href="https://thecaqprod.wpenginepowered.com/wp-content/uploads/2023/11/caq_perspectives-on-corporate-reporting-the-audit-and-regulatory-environment_2023-11.pdf">Download the full report</a> now to explore perspectives of institutional investors, who utilize the work of public company auditors, on corporate reporting, audit quality, and potential standard setting topics.

Perspectives on Corporate Reporting, the Audit, and Regulatory Environment: Institutional Investor Research Findings

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Audit Quality

Anti-Fraud

Emerging Reporting Areas

In a rapidly evolving fraud risk landscape, fighting fraud is more important and more challenging than ever.

To mark this year’s International Fraud Awareness Week (November 12-18), the Center for Audit Quality (CAQ) is partnering with the Association of Certified Fraud...

<img class="wp-image-14170 alignright" src="https://thecaqprod.wpenginepowered.com/wp-content/uploads/2023/11/Fraud-Week-2023-Vertical-Logo-908x998-1-1024x880.png" alt="International Fraud Awareness Week" width="350" height="301" />In a rapidly evolving fraud risk landscape, fighting fraud is more important and more challenging than ever.

To mark this year’s International Fraud Awareness Week (November 12-18), the Center for Audit Quality (CAQ) is partnering with the <a href="https://www.acfe.com/">Association of Certified Fraud Examiners (ACFE</a>) to help members of the financial reporting ecosystem fight fraud. As a partner of the Anti-Fraud Collaboration (AFC), the CAQ and the AFC collaborated to create a wide range of resources to assist in deterring and detecting financial fraud.

As the Director of Anti-Fraud Initiatives, I work closely with representatives from the Anti-Fraud Collaboration, task forces, and the broader profession on issues related to fraud deterrence and detection. What I can say is this: fighting fraud is a shared responsibility among all members of the financial reporting ecosystem.

It’s never too late to learn how to better detect and deter fraud in your line of work. I have compiled a list of resources for you to enhance your anti-fraud skillsets today:

International Fraud Awareness Week
As organizations across the globe are increasing their anti-fraud efforts, I encourage you to explore ways that you can further enhance your anti-fraud skillset. <a href="https://antifraudcollaboration.org/international-fraud-awareness-week-2023">Explore resources</a> from a range of topics.

Designing and Executing a Strong Fraud Risk Management Program
The AFC has published a new resource this week that explores how organizations can address emerging fraud risks through the design and implementation of a strong fraud risk management (FRM) program. The resource dives into how to analyze vulnerable areas and respond to risks and continue to evaluate FRM programs to ensure they are effective. <a href="https://antifraudcollaboration.org/designing-and-executing-a-strong-fraud-risk-management-program/">Download</a> the resource today.

Fighting Fraud for Two Decades
The Sarbanes-Oxley Act altered the landscape of our financial reporting system by increasing public company management’s accountability for fraud prevention and the external auditors’ independence. Auditors are fulfilling their responsibility to fight fraud under US auditing standards, but fraud deterrence and detection is a shared responsibility. To understand how the U.S. has one of the strongest financial reporting systems in the world, discover the <a href="https://www.thecaq.org/fighting-fraud-for-two-decades">history of fighting fraud</a> today.

Anti-Fraud Resources from the CAQ
A the CAQ, we are always taking necessary steps to focus on fraud deterrence, detection, and risk management. Visit our <a href="https://www.thecaq.org/anti-fraud">Fraud Resources page</a> and explore resources to learn how to strengthen anti-fraud efforts in your organization.

Explore the Anti-Fraud Collaboration
The key to protecting companies from fraud is for all members of the financial reporting ecosystem to demonstrate vigilance, a resolve to exercise professional skepticism, focus on culture and attention to risk. In 2010, the CAQ, along with <a href="https://www.financialexecutives.org/">Financial Executives International</a>, <a href="https://www.theiia.org/">The Institute of Internal Auditors</a>, and the <a href="https://www.nacdonline.org/">National Association of Corporate Directors</a> founded the Anti-Fraud Collaboration. The <a href="https://antifraudcollaboration.org/">AFC</a> provides a comprehensive list of resources, case studies, and self-study online courses for all members of the financial reporting ecosystem. Explore resources focused on <a href="https://antifraudcollaboration.org/category/culture/">culture</a>, <a href="https://antifraudcollaboration.org/category/risk/">risk</a>, <a href="https://antifraudcollaboration.org/category/skepticism/">skepticism</a>, and <a href="https://antifraudcollaboration.org/category/technology/">technology</a>.

This International Fraud Awareness Week, I urge you to stay engaged and seek out the latest resources to help protect your organization. I also encourage you to follow the AFC on <a href="https://twitter.com/antifraudcollab">Twitter</a> and <a href="https://www.linkedin.com/company/antifraudcollaboration/">LinkedIn</a> to stay up to date on the latest anti-fraud resources.

&nbsp;

<hr />

Author: <a href="https://www.thecaq.org/about-us/our-people/lucy-wang">Lucy Wang, CFE</a>, Director, Anti-Fraud Initiatives

International Fraud Awareness Week: Are You Prepared to Fight Fraud?

Blog Post

In June 2023, the Public Company Accounting Oversight Board (PCAOB) proposed amendments to its auditing standards related to a company’s noncompliance with laws and regulations, or NOCLAR for short. The proposed amendments garnered the attention of a diverse group of stakeholders, resulting in 139 individual comment letters. Several comment letters were also submitted on behalf of a group of individuals or organizations, including close to 300 additional signatures captured in those letters.

Comment Letter Analysis | NOCLAR

Comment Letter

In this comment letter, more than 200 audit committee chairs, board members and other capital markets stakeholders signed on to share their concerns about proposed Amendments to PCAOB Auditing Standards related to a Company’s Noncompliance with Laws and Regulations and Other...

In this comment letter, more than 200 audit committee chairs, board members and other capital markets stakeholders signed on to share their concerns about <a href="https://assets.pcaobus.org/pcaob-dev/docs/default-source/rulemaking/docket-051/pcaob-release-no.-2023-003---noclar.pdf?sfvrsn=fe43e8a_2&amp;utm_source=PCAOB+Email+Subscriptions&amp;utm_campaign=98790bd37a-EMAIL_CAMPAIGN_2019--forums2019_COPY_01&amp;utm_medium=email&amp;utm_term=0_c97e2ba223-98790bd37a-125440512">proposed Amendments to PCAOB Auditing Standards related to a Company’s Noncompliance with Laws and Regulations and Other Related Amendments</a>. This letter was submitted on behalf audit committee chairs, members, and other public company board members who collectively sit on the boards of public companies aggregating to over $2 trillion in market capitalization.

These stakeholders support the PCAOB’s mission to protect investors by modernizing audit standards that support the performance of continued high-quality audits in today’s complex business environment. However, they are concerned that the proposed amendments do not advance that mission. The board members are concerned that the PCAOB’s proposal risks reducing audit quality and lessening investor protections while unnecessarily increasing the cost and complexity of audits.  

 Specifically, the board members shared the following concerns:  
<ul>
 	<li data-leveltext="" data-font="Symbol" data-listid="2" data-list-defn-props="{&quot;335552541&quot;:1,&quot;335559684&quot;:-2,&quot;335559685&quot;:720,&quot;335559991&quot;:360,&quot;469769226&quot;:&quot;Symbol&quot;,&quot;469769242&quot;:[8226],&quot;469777803&quot;:&quot;left&quot;,&quot;469777804&quot;:&quot;&quot;,&quot;469777815&quot;:&quot;hybridMultilevel&quot;}" aria-setsize="-1" data-aria-posinset="1" data-aria-level="1">The proposed scope is too broad. </li>
 	<li data-leveltext="" data-font="Symbol" data-listid="2" data-list-defn-props="{&quot;335552541&quot;:1,&quot;335559684&quot;:-2,&quot;335559685&quot;:720,&quot;335559991&quot;:360,&quot;469769226&quot;:&quot;Symbol&quot;,&quot;469769242&quot;:[8226],&quot;469777803&quot;:&quot;left&quot;,&quot;469777804&quot;:&quot;&quot;,&quot;469777815&quot;:&quot;hybridMultilevel&quot;}" aria-setsize="-1" data-aria-posinset="2" data-aria-level="1">The proposal does not sufficiently take into account a company’s existing compliance function and the shared responsibility of the board of directors, the audit committee, the chief compliance officer, and the general counsel. </li>
 	<li data-leveltext="" data-font="Symbol" data-listid="2" data-list-defn-props="{&quot;335552541&quot;:1,&quot;335559684&quot;:-2,&quot;335559685&quot;:720,&quot;335559991&quot;:360,&quot;469769226&quot;:&quot;Symbol&quot;,&quot;469769242&quot;:[8226],&quot;469777803&quot;:&quot;left&quot;,&quot;469777804&quot;:&quot;&quot;,&quot;469777815&quot;:&quot;hybridMultilevel&quot;}" aria-setsize="-1" data-aria-posinset="3" data-aria-level="1">Auditors are not lawyers and as a result the proposed amendments would expand the auditor’s role to include knowledge and expertise outside their core competencies. </li>
 	<li data-leveltext="" data-font="Symbol" data-listid="2" data-list-defn-props="{&quot;335552541&quot;:1,&quot;335559684&quot;:-2,&quot;335559685&quot;:720,&quot;335559991&quot;:360,&quot;469769226&quot;:&quot;Symbol&quot;,&quot;469769242&quot;:[8226],&quot;469777803&quot;:&quot;left&quot;,&quot;469777804&quot;:&quot;&quot;,&quot;469777815&quot;:&quot;hybridMultilevel&quot;}" aria-setsize="-1" data-aria-posinset="3" data-aria-level="1">The proposal will substantially increase the cost of the audit without a commensurate benefit. </li>
</ul>
In the comment letter, the signatories agree:  
<ol>
 	<li data-leveltext="%1." data-font="Calibri" data-listid="3" data-list-defn-props="{&quot;335552541&quot;:0,&quot;335559684&quot;:-1,&quot;335559685&quot;:720,&quot;335559991&quot;:360,&quot;469769242&quot;:[65533,0],&quot;469777803&quot;:&quot;left&quot;,&quot;469777804&quot;:&quot;%1.&quot;,&quot;469777815&quot;:&quot;hybridMultilevel&quot;}" aria-setsize="-1" data-aria-posinset="1" data-aria-level="1">Any change should keep the auditor focused on NOCLAR that could materially impact the financial statements, such as material penalties or loss contingencies.</li>
 	<li data-leveltext="%1." data-font="Calibri" data-listid="3" data-list-defn-props="{&quot;335552541&quot;:0,&quot;335559684&quot;:-1,&quot;335559685&quot;:720,&quot;335559991&quot;:360,&quot;469769242&quot;:[65533,0],&quot;469777803&quot;:&quot;left&quot;,&quot;469777804&quot;:&quot;%1.&quot;,&quot;469777815&quot;:&quot;hybridMultilevel&quot;}" aria-setsize="-1" data-aria-posinset="1" data-aria-level="1">Any requirement of the auditor should be risk-based and consider the role the company’s compliance program plays in detecting NOCLAR that could be material to the audited financial statements. </li>
</ol>
It takes company management, audit committees, auditors, and regulators working in concert to foster a system that supports both high-quality financial reporting and audits. This comment letter contains important perspectives from these stakeholders on AS 2405 that the PCAOB should consider.  

Read the full comment letter <a href="https://thecaqprod.wpenginepowered.com/wp-content/uploads/2023/09/Board-AC_CommentLtr_PCAOB_2023_08_Amended9-12.pdf">here</a>.

Comment Letter, Sign-on Letter | PCAOB: AS 2405, A Company’s Noncompliance with Laws and Regulations

In this comment letter, the CAQ provides views to the PCAOB related to its request for comment on its proposed Amendments to PCAOB Auditing Standards related to a Company’s Noncompliance with Laws and Regulations and Other Related Amendments.

The CAQ supports...

In this comment letter, the CAQ provides views to the PCAOB related to its request for comment on its <a href="https://assets.pcaobus.org/pcaob-dev/docs/default-source/rulemaking/docket-051/pcaob-release-no.-2023-003---noclar.pdf?sfvrsn=fe43e8a_2&amp;utm_source=PCAOB+Email+Subscriptions&amp;utm_campaign=98790bd37a-EMAIL_CAMPAIGN_2019--forums2019_COPY_01&amp;utm_medium=email&amp;utm_term=0_c97e2ba223-98790bd37a-125440512">proposed Amendments to PCAOB Auditing Standards related to a Company’s Noncompliance with Laws and Regulations and Other Related Amendments</a>.

The CAQ supports the Board’s intention to modernize and strengthen auditing standards related to the auditor’s consideration of a company’s noncompliance with laws and regulations, including fraud, as a way to strengthen auditing practices and continuously improve audit quality. We believe that any project to modernize the auditing standards should be focused on enhancing audit quality and the benefit of an independent audit, while making it clear what an auditor is expected to do in the context of a financial statement audit.

We are concerned that the proposed amendments would result in requirements that may not be practical or achievable and could cause considerable confusion with respect to the appropriate role of auditors, ultimately to the detriment of investors.

The auditing profession has been and remains committed to its role among the various stakeholders in the US financial reporting ecosystem, and is supportive of enhancements to existing AS 2405, but we believe that updates need to be principles based and allow the auditor to take a risk-based approach.  

We believe further engagement with all relevant stakeholders in the financial reporting ecosystem, including public roundtables and field testing, is needed to understand the implications of the proposal and whether it will meet the Board’s objectives.

Key Observations

Our key observations on the proposal fall in the following five categories:
<ol>
 	<li>Fundamental shift in the objectives of an audit: The requirements proposed in the standards represent a fundamental shift in the auditor’s objectives in planning and performing the audit. The proposed standard puts auditors in the position of performing procedures consistent with the objective of a compliance audit or forensic investigation. We recommend the Board look to the rulemaking history of Section 10A of the Securities Exchange Act, as well as the rulemaking history of PCAOB Auditing Standard No. 2, and the later need for PCAOB Auditing Standard No. 5, when finalizing the proposed standard.</li>
 	<li>Scope of the proposal: The securities laws and their implementing regulations do not require a public company’s management to identify all laws and regulations to which the public company is subject, and yet this proposal appears to essentially require auditors to do so. Our concern with the lack of clarity related to the "threshold" auditors would use to identify laws and regulations on which to focus their procedures is at the heart of our concerns with the proposed standards. Clarifying the threshold of which laws and regulations an auditor would need to focus on, and how this would relate to the risk assessment the auditor performs with respect to the historical financial statements being audited, would improve the operability of the proposed standard.</li>
 	<li>Auditors are not lawyers or forensic specialists: Broadening the scope of the laws and regulations for which the auditor must consider whether non-compliance “could reasonably” have a material impact on the financial statements would require a deep level of legal and regulatory subject matter expertise and interpretation, which does not fall within the core competencies of financial statement auditors and could be viewed as the auditor engaging in the unauthorized practice of law. The proposed standards significantly expand auditors’ need for expertise from significant numbers of lawyers, regulatory experts, fraud experts, and other specialists.</li>
 	<li>Role of auditor versus role of management: A long-established accountability framework exists, whereby management prepares and discloses financial and other information; auditors obtain reasonable assurance about whether the financial information is prepared in accordance with a financial reporting framework, in all material respects; and regulators provide oversight of the public companies and auditors. The proposal essentially transforms the auditor’s role into a responsibility to monitor an entity’s compliance with evolving laws and regulations, which is, at a minimum, a compliance function and, potentially, a management function. Such a transformation would come at the detriment of the auditor’s core responsibilities of performing an independent assessment of the financial statements prepared by management.</li>
 	<li>Costs and benefits of NOCLAR proposal require further study: The costs and benefits of the NOCLAR proposal have not been adequately studied. The proposal does not quantify the substantial costs that could be incurred as a result of the proposed standards, nor does it provide evidence that benefits will be achieved.</li>
</ol>
Read the full comment letter <a href="https://thecaqprod.wpenginepowered.com/wp-content/uploads/2023/08/caq_pcaob_NOCLAR_2023_08.pdf">here</a>.

Comment Letter | PCAOB: AS 2405, A Company’s Noncompliance with Laws and Regulations

The CAQ's Dennis McGowan will be speaking at this year's ACFE Global Fraud Conference on the panel, Fraud Risk in the New Risk Fronter: ESG Reporting and Practices.

Panel Description:

ESG practices and reporting are quickly emerging as a new frontier of...

The CAQ's Dennis McGowan will be speaking at this year's ACFE Global Fraud Conference on the panel, <a href="https://events.acfe.com/session_catalog/#/attendee/6C92606D-E3B9-45EC-A013-59C96EB5D76E/catalog">Fraud Risk in the New Risk Fronter: ESG Reporting and Practices</a>.

Panel Description:

ESG practices and reporting are quickly emerging as a new frontier of risk in business and society. The potential for fraud is rising alongside it. Join us for a discussion among experts in various fields and learn how organizations can design and implement controls to ensure accurate ESG practices and reporting.

You Will Learn How To:
<ul>
 	<li>Explore the emerging risks around ESG practices and reporting, including “greenwashing”</li>
 	<li>Identify the potential for fraud in ESG practices and disclosures</li>
 	<li>Examine ways in which organizations can design effective controls around ESG information to build confidence in disclosures and mitigate fraud risk</li>
</ul>
Speakers: Brad Monterio, Benito Ybarra, CFE, Dennis McGowan, CPA, Grant Ostler
<div class="session-datetime">CPE: 1.5 | Ethics CPE: No</div>
<div class="session-datetime">Session Level: Overview</div>
<div class="session-datetime">Field of Study: Specialized Knowledge</div>
<div class="session-datetime">Recommended Prerequisite: None</div>
<div></div>
<div><a href="https://urldefense.proofpoint.com/v2/url?u=https-3A__www.fraudconference.com_-3F-5Fga-3D2.118560844.417916913.1685452717-2D857206003.1666707546-26-5Fgac-3D1.120195578.1684334086.CjwKCAjw9pGjBhB-2DEiwAa5jl3NDE7ytri5y49Prd-5FbJHZO9Th-2DNTVrV5exZ4kWYyV8tvAuAFRVwCsBoCLa0QAvD-5FBwE&amp;d=DwMGaQ&amp;c=euGZstcaTDllvimEN8b7jXrwqOf-v5A_CdpgnVfiiMM&amp;r=4PdDGDrNTfeQvy4B6Rmdpg&amp;m=VLLdb4L-GvMvHc4zrWRqBmGeXpT-KQiORRzR5SuXAwY&amp;s=SupLr1GDivGHjeLom0gi4NFXestu--UaFjYX1MUnv9g&amp;e=">Register for the conference.</a></div>

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