Welcome back, Audit Insiders! As the summer winds down, I’ve been reminded of the value of taking time to connect outside of our day-to-day work. The CAQ recently gathered for a staff outing to Nats Park, which provided a welcome opportunity to strengthen relationships and recharge before what promises to be an active fall season. With Labor Day approaching and year-end planning on the horizon, this edition highlights several developments shaping the profession.
To start, the PCAOB announced members of its new Inspections Modernization Council, put its draft five-year strategic plan out for comment, and closed the comment period on its first-ever request for input on its standard-setting and research agendas. At the SEC, the Division of Enforcement created a dedicated Financial Reporting and Accounting Unit. At the CAQ, my colleagues and I have been just as busy, filing our comment letter on the SEC’s filer status proposal, releasing the Spring 2026 Audit Partner Pulse Survey, and marking the anniversary of the Sarbanes-Oxley Act with reflections from leaders across our member firms.
Read on for what I’m tracking.
The CAQ Comments on the SEC’s Filer Status Proposal
On July 20, the CAQ submitted a comment letter on the SEC’s proposal to enhance emerging growth company accommodations and simplify filer status for reporting companies. We support the Commission’s objective of simplifying filer status definitions and reducing unnecessary regulatory cost, while expressing concern that the proposal’s exemptions from Section 404(b) auditor attestation may be too broad. In particular, the CAQ believes the proposed five-year exemption from Section 404(b) auditor attestation for newly public companies regardless of size is not appropriately tailored. The letter emphasizes that auditor attestation is an important investor protection and component of the capital markets ecosystem, and suggests the Commission’s objectives could be achieved through more targeted reforms that preserve important safeguards.
Comments Close on the PCAOB’s Standard-Setting and Research Agendas
On June 23, the PCAOB issued a public request for comment on its standard-setting and research agendas, its overall approach to standard setting, and how the SEC’s semiannual reporting proposal might affect PCAOB standards. This is the first time the Board has invited public input at this stage of the process. In our comment letter, the CAQ encouraged the PCAOB to develop a transparent conceptual framework to guide standard-setting priorities and processes, we supported adding data and technology, including digital assets, to the research agenda, and we supported projects related to fraud, NOCLAR, auditor independence, and going concern. Our letter also recommended against pursuing new standard-setting projects on critical audit matters (CAMs) or audit quality indicators, citing evidence that CAMs are meeting their intended objectives and concerns that firm and engagement metrics may be of limited value outside the context of audit committee discussions.
Comments were due August 7, and we’ll continue to monitor and update as appropriate.
PCAOB Announces Members of the Inspections Modernization Council
On July 9, the PCAOB named the 12 members of its new Inspections Modernization Council (IMC), which will advise the Chairman, the Board, and staff on the inspection program and on emerging technologies relevant to oversight. The Council is organized around three focus areas: generating more meaningful inspection report outputs for the people who use them, leveraging automation and artificial intelligence, and centering inspections on firms’ systems of quality control.
The PCAOB has also posted discussion materials from recent meetings of the IMC, which address topics including a quality control-informed inspection approach, technology use, inspection reporting, and remediation, offering insight into the PCAOB’s ongoing efforts to evolve its inspection framework.
PCAOB Requests Comment on Its Draft 2026-2030 Strategic Plan
On July 20, the PCAOB issued a request for comment on the six draft goals that will shape its 2026-2030 strategic plan, spanning standard setting, inspections and registration, enforcement, stakeholder engagement, technology and data, and organizational effectiveness. Several underlying objectives will be of particular interest to practitioners, including focusing inspections on firms’ systems of quality control, improving inspection report clarity and timeliness, establishing a permanent broker-dealer auditor inspection program, and fostering alignment with international standards. Comments are due September 4.
We are preparing our response, and we encourage stakeholders across the profession to share their perspectives with the Board as well.
PCAOB Inspection Results Show Improvement Across Global Network Firms
The PCAOB recently released inspection reports for the six U.S. global network firms, offering an early look at 2025 inspection results. Across the 312 audits reviewed, the average Part I.A deficiency rate improved to 13%, down from 26% in 2024, with all six firms reporting lower deficiency rates year over year. The reports also showed that restatements tied to inspected audits remained limited, with only one restatement identified across the firms reviewed. While additional inspection reports for other annually inspected firms are still forthcoming, the latest results suggest continued progress in firms’ efforts to strengthen audit quality and address areas highlighted through the inspection process.
SEC Proposes New Regulation for Crypto Assets
The SEC has proposed a new framework, dubbed Regulation Crypto Assets, designed specifically for certain investment contracts involving crypto assets. The proposal would create tailored exemptions from Securities Act registration requirements while establishing disclosure, reporting, and investor protection requirements intended to support capital formation and innovation in digital asset markets.
Kyle Hauptman Sworn in as PCAOB Board Member
Kyle Hauptman was sworn in as a member of the PCAOB Board on August 10. Previously Chairman of the National Credit Union Administration, Hauptman brings experience in financial regulation and economic policy and has highlighted the growing role of technology in the audit profession as an area of focus. The CAQ looks forward to engaging with Board Member Hauptman as the PCAOB continues its work to support investors and audit quality.
PCAOB Releases New QC 1000 Implementation Resource
The PCAOB has published a new Q&A resource to help firms prepare for implementation of QC 1000, A Firm’s System of Quality Control. The guidance is the latest addition to the Board’s growing library of implementation materials aimed at helping auditors understand and apply the new quality control standard before it takes effect.
Learn more here.
The Audit Effect: The Role of the Auditor
How Independence Continues to Anchor Trust in the Capital Markets
July 30 marked 24 years since the Sarbanes-Oxley Act was signed into law, and much of what we now take for granted traces back to that statute: the creation of the PCAOB, strengthened auditor independence requirements, and an elevated oversight role for the audit committee. To mark the anniversary, the CAQ published How Independence Continues to Anchor Trust in the Capital Markets, which looks at why those independence requirements remain a cornerstone of audit quality.
This piece arrives at a time when the profession is navigating rapid technological change, evolving business models, and increasingly complex stakeholder expectations. One of its central observations is that while the tools supporting audits continue to advance, the foundational principles that underpin financial reporting remain unchanged. As firms incorporate AI and other emerging technologies into their processes, independence continues to serve as a critical safeguard that helps ensure professional judgment remains objective and focused on the public interest. The framework established by SOX relies on auditors, audit committees, regulators, and company management, each playing a role in upholding confidence in the capital markets. Two decades after the law’s enactment, that shared commitment remains an important factor in supporting high-quality audits and investor trust.
Independence as the Foundation for Trust in an Evolving Market
Laura McCracken, Audit and Assurance Partner and Regulatory Leader at Deloitte, expanded on these themes in a guest Audit in Action blog. Laura spotlights why independence sits at the center of the system of standards, oversight, and independent assurance that the capital markets rely on, and makes a point on technology that I expect to hear a great deal more of this year: “technology elevates the audit; it does not replace the need for independence, objectivity, and professional judgment.”
Earlier in the month, we also published How Auditor Expertise Strengthens U.S. Capital Markets, featuring Andrea Castle, Audit Partner at Crowe, and Deanna Byrne, US Assurance Leader at PwC. I encourage you to read both and share them with your network.
Fighting Fraud
A Look Back at the 37th Annual ACFE Global Fraud Conference
The 37th Annual ACFE Global Fraud Conference took place July 12-17 in Boston, bringing together thousands of anti-fraud professionals and more than 130 speakers. Dr. Hany Farid, Professor at UC Berkeley and co-founder and Chief Science Officer of GetReal Security, spoke on navigating the age of artificial intelligence, a session that felt especially relevant given how quickly deepfake-enabled schemes are evolving.
For a recap of the conference and its takeaways, take a look here.
SEC Creates New Financial Reporting and Accounting Unit
The SEC announced the creation of a new Financial Reporting and Accounting Unit (FRAU) within its Division of Enforcement. The unit brings together attorneys and accountants with specialized expertise in financial reporting, accounting, and auditing to support the SEC’s efforts to investigate and pursue financial reporting fraud, accounting violations, and auditor misconduct. According to the SEC, the new unit is intended to strengthen the agency’s ability to identify and address misconduct involving public company financial reporting and audit-related matters. The move consolidates technical accounting and auditing expertise within Enforcement and reflects the SEC’s continued emphasis on protecting investors through rigorous oversight of financial reporting.
Spring 2026 Audit Partner Pulse Survey
On July 15, we released the Spring 2026 Audit Partner Pulse Survey, and it sheds light on the top trends shaping the current business landscape. As Amy O’Connor, our Vice President of Public Affairs, put it, this edition “highlights a shift from holding steady to moving forward with greater intent, even as uncertainty remains.”
For the first time since the survey began in 2022, AI and data analytics ranked as top strategic priorities for audit partners’ largest clients. However, nearly 90% of partners described their largest client’s AI governance as developing or early stage, with only 6% calling it advanced. AI governance also topped the list of audit committee challenges at 57%, ahead of cybersecurity at 51%.
Amy expanded on the findings in her blog, Three Trends Shaping Business Strategy in 2026, and my colleague Vanessa Teitelbaum, our Senior Director of Professional Practice, translated them for a board audience in Corporate Board Member. Take a look, and I’d love to hear what you think.
Audit Insider Webinar with SEC Leadership
On July 13, I had the pleasure of joining a conversation with Kurt Hohl, Chief Accountant at the SEC, and Heather Rosenberger, Chief Accountant in the SEC’s Division of Corporation Finance, alongside my colleague Annette Schumacher, Senior Director of Professional Practice. In our meeting, we covered the regulatory reporting issues facing public companies and their auditors right now, current SEC initiatives, and recent proposals.
If you were not able to join us live, the recording is available, and I shared my top five takeaways here. Many thanks to Kurt and Heather for their time and candor, and we look forward to continued collaboration.
In our latest Audit in Action blog, Troy Merkel, Assurance Digital Leader at RSM explores how AI is moving from concept to practical application across the audit profession.
He highlights three tools recently integrated into RSM’s digital audit ecosystem: Ask Luca, a generative AI assistant that helps auditors access firm-approved guidance more efficiently; Microsoft M365 Copilot, which supports routine tasks such as summarizing information and drafting communications; and RSM Luca Resourcing, a workforce planning tool that uses technology to better align talent and engagement needs. While the applications differ, each is designed to reduce administrative burden and allow auditors to spend more time applying professional judgment, skepticism, and risk-focused analysis.
Merkel positions technology as a force multiplier that can improve consistency, efficiency, and execution quality, while reinforcing that human oversight remains central to maintaining trust in the audit process. Explore more of his insights in the full blog.
Registration Open: AICPA Conference on Current SEC and PCAOB Developments
Registration is now open for the AICPA & CIMA Conference on Current SEC and PCAOB Developments, taking place December 7-9 in Washington, D.C., and online. The conference brings together SEC, PCAOB, and FASB leaders, along with audit and financial reporting professionals, to discuss the latest accounting, auditing, and regulatory developments shaping the profession. Attendees will gain insights directly from regulators and standard setters while exploring what may be on the horizon for public company reporting and auditing.
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— Dennis McGowanVice President, Professional Practice and Anti-Fraud Initiatives |