In this comment letter, the CAQ provides views to the PCAOB related to its request for comment on its Proposed Amendments Related to Aspects of Designing and Performing Audit Procedures that Involve Technology-Assisted Analysis of Information in Electronic Form.
The CAQ is supportive of the Board’s objective to provide greater guidance and clarity for auditors when using technology-assisted analysis within the audit as the use of technology-assisted analysis in the audit continues to become more pervasive. While we recognize that the proposed amendments are intentionally focused on providing clarity regarding the use of technology-assisted analysis within the existing framework for audit evidence in the PCAOB standards, we encourage the Board to potentially think broader about technology, the audit, and audit quality. The CAQ welcomes the opportunity to engage in further dialogue with the PCAOB and especially the Board’s Technology Innovation Alliance Working Group on these topics.
Our most significant comments relate to:
- Clarification provided by defining tests of details
We support the clarification in AS 1105.13(b), which states that a test of details (TOD) involves performing procedures with respect to individual items included in an account or disclosure. However, we recommend that the discussion on analytical procedures be removed from the note to AS 1105.13.
- Evaluating the reliability of external information maintained by the company in electronic form
- It would be helpful if the Board would provide examples of external information maintained by the company in its information systems in electronic form to alleviate uncertainty regarding what is meant by “in its information systems.”
- It would be helpful if the Board could clarify the phrase “test the company’s procedures” used in AS 1105.10A, as this phrase is not used elsewhere within PCAOB standards.
- We believe that AS 1105.10A should provide the auditor with the ability to directly perform procedures to evaluate the reliability of external information maintained by the company in its information systems in electronic form.
- We do not agree with the requirements in AS 1105.10A(b) that appear to require testing of information technology general controls and application controls in all circumstances (where the auditor chooses to test controls rather than testing the company’s procedures). We believe that the auditor should be permitted to determine the degree of control testing required based on the auditor’s risk assessment.
- We recommend updates to the discussion of “original documents” in AS 1105.08, which relates to the reliability of evidence provided by information in electronic form.
- Investigation of items meeting the criteria established by the auditor when designing and performing substantive procedures
We believe that there is an opportunity for the PCAOB to provide additional guidance to auditors on key topics related to the investigation of items meeting the criteria established by the auditor. Specifically, clarification would be helpful related to certain situations that the auditor may face when performing audit procedures over 100% of the population using technology-assisted analysis.
Read the full comment letter here.