March 20, 2024

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

We are pleased to submit the attached comment letter written in response to the PCAOB’s reopening of the comment period on its proposed Amendments to PCAOB Auditing Standards related to a Company’s Noncompliance with Laws and Regulations and Other Related Amendments and related roundtable briefing paper. 

This comment letter is a supplement to the letter that we submitted on August 7, 2023. We continue to echo the comments and concerns raised in that comment letter. In this letter we provide the following:  

  • Data we have compiled and analysis we have completed subsequent to our August 7, 2023, comment letter;   
  • Alternatives to the proposed requirements that should form the basis for further outreach and consultation by the PCAOB; and  
  • Observations from the March 6, 2024 virtual roundtable.   

As reflected in the results of the additional data we have compiled and analysis we have completed, and based on our observations from the roundtable, there is a wide range of views with respect to where enhancements are needed in the area of NOCLAR, as well as with respect to the proposed requirements. Given the range of perspectives on current practice and the opportunities for enhancement through a revision to the standards, continued multi-stakeholder dialogue is needed so that all impacted stakeholders have clarity on objectives, expectations, and responsibilities. Additionally, in our view, the PCAOB has not yet demonstrated that they have sufficiently studied the costs and benefits of, and the alternatives to, the proposed requirements. Further study and evaluation are needed.  

We believe that the significant and substantial nature of the changes that are likely needed to the NOCLAR proposal warrants re-exposure. We believe that an additional investment of time is needed to ensure that the effects of any changes made, including any downstream effects, are fully understood and consistently interpreted, as well as to ensure the purpose of the standard and expected changes to auditor behavior are clearly understood, that it is capable of being consistently implemented, and that it will ultimately benefit investors.  

Read the full comment letter here.