Comment Letter

PCAOB: The Auditor’s Use of Confirmation

Friday, February 17, 2023

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In this comment letter, the CAQ provides views to the PCAOB related to its request for comment on The Auditor’s Use of Confirmation, and Other Proposed Amendments to PCAOB Standards.

Auditors are committed to performing high-quality audits in accordance with professional standards, and external confirmations play an important role in many audits. The CAQ supports the Board’s objectives of updating its interim standard related to the confirmation process as the confirmation process has continued to evolve since adoption. For example, advances in information technology and the use of third-party intermediaries have had a significant impact on the confirmation process.

While we support the objectives of the proposal as set forth by the Board, we express some overarching concerns that we encourage the Board to address in the final standard. These include:

  • Risk Assessment and Auditor Judgment
    • We are concerned that some portions of the proposed standard remove or limit the auditor’s judgment to design and perform audit procedures in a manner that addresses the assessed risks of material misstatement.
  • Persuasiveness of Audit Evidence
    • The provisions of the proposed standard unduly prescribe the nature of the audit procedures an auditor may perform to address risks of material misstatement by positioning confirmations as the most persuasive form of audit evidence. We are concerned the proposed standard may stifle the innovation of new forms and ways of obtaining audit evidence by always requiring confirmation, or the consideration of confirmation, for certain accounts and transactions.
  • Recommendations
    • Retain the criteria to overcome the required confirmation of accounts receivable in extant AS 2310, The Confirmation Process;
    • Include criteria to overcome the required confirmation of cash held by third parties similar to those included in paragraph .34 of extant 2310 for accounts receivable; and,
    • Indicate that an auditor “may consider” confirming other financial relationships and the terms of complex or significant unusual transactions connected to a significant risk.

Read the full comment letter here.