Public Policy and Technical Alert | April 2022

As part of the Center for Audit Quality’s (CAQ) ongoing effort to keep members and stakeholders informed on significant public policy and accounting matters, we are pleased to offer the Public Policy and Technical Alert (PPTA). Each month, the PPTA highlights and examines the regulatory, standard-setting, legislative, and broader financial reporting developments impacting the public company audit profession. Please note that the PPTA is intended as general information and should not be relied upon as being definitive or all-inclusive. The CAQ encourages member firms to refer to the rules, standards, guidance, and other resources in their entirety at the hyperlinks provided below. All entities should carefully evaluate which requirements apply to their respective organizations.

Statement from the Chair: “Working on ‘team cyber’”

SEC Chair Gary Gensler delivered remarks before the Financial and Banking Information Infrastructure Committee and the Financial Services Sector Coordinating Council. In his remarks, Gensler explored the connection between cybersecurity and securities. He discussed the importance of strong cybersecurity, saying that “cyber relates to each part of the SEC’s three-part mission: investor protection, facilitating capital formation, and that which is in the middle, promoting fair, orderly, and efficient markets.” He touched on cybersecurity policy as well as security postures for financial sector SEC registrants, public companies, service providers, and the SEC itself.

PCAOB requests comment on the impact of auditing requirements related to estimates and specialists

The PCAOB issued a request for comment on the initial impact of new requirements for auditing accounting estimates and using the work of specialists. PCAOB Chair Erica Y. Williams said input is welcomed from “investors, audit committees, preparers, academics, audit firms, and others who use financial statements.” All comments should refer to Interim Analysis No. 2022-001, Estimates and Specialists Audit Requirements, and should be submitted no later than June 10, 2022.

Jackie Cottrell to depart as director of the PCAOB’s Office of External Affairs

The PCAOB announced that Jackie Cottrell left her role as director of its Office of External Affairs (OEA). “Jackie’s departure is truly a loss for the PCAOB and for this Board. She has been a tireless advocate and spokesperson for the PCAOB,” said PCAOB Chair Erica Y. Williams. Cottrell joined the PCAOB as OEA Director in June 2020. Kent Bonham, the PCAOB’s deputy director for government relations and outreach, has been appointed acting director of the OEA.

PCAOB 2021 annual report

The PCAOB published its 2021 annual report. The report summarizes its operations and financial results for the fiscal year ended December 31, 2021.

FASB proposes updates to reference rate reform guidance

The FASB issued a proposed Accounting Standards Update (ASU) that would extend the period of time preparers can utilize the reference rate reform relief guidance and expand the secured overnight financing rate based interest rates available as benchmark interest rates. Stakeholders are encouraged to review and provide feedback on the proposed ASU by June 6.

How high-quality audits protect the public interest and propel businesses forward

The AICPA published an article exploring how high-quality audit work supports a functioning economy and protects the public interest. The article touches on the importance of peer reviews and the evolution of audits. It also explores the AICPA’s role in ensuring high-quality audits and provides a list of audit resources.

Great audit methodologies can enhance your data analytics

The AICPA published key takeaways from a recent webcast featuring AICPA employee and data analytics expert Jimmy Young.

IFRS Foundation publishes 2021 annual report

The International Financial Reporting Standards (IFRS) Foundation published its annual report and audited financial statements for the year  ended December 31, 2021. The report discusses the steps taken to form the new International Sustainability Standards Board, publication of the IFRS Foundation’s revised Constitution, and more.

FRC publishes 3-Year Plan takes further steps towards ARGA

The Financial Reporting Council (FRC) published its 3-Year Plan, which sets out the FRC’s progress towards establishing the new Audit, Reporting and Governance Authority (ARGA). The 3-Year Plan follows the UK government’s 2021 consultation, Restoring Trust in Audit and Corporate Governance, which moved the FRC closer to its aim of becoming the ARGA. Respondents to the FRC’s consultation expressed continued support for the establishment of the ARGA.

IAASB 2022-2023 work plan approved by the Public Interest Oversight Board

The International Auditing and Assurance Standards Board (IAASB) announced that its 2022-2023 Work Plan, A Public Interest Focus in Uncertain Times, has been approved by the Public Interest Oversight Board. The work plan emphasizes sustainability and environmental, social, and governance assurance. It also highlights potential topics in the Audit and Review space (e.g., responding to assessed risks of material misstatement and the impact of technology on various standards) that will be considered for a project in 2023. A key focus that will remain is the progression and completion of projects underway at the start of 2022, including audits of financial statements of less complex entities, audit evidence, going concern, and fraud.

IAASB modernizes its standard for group audits in support of audit quality

The IAASB released International Standard on Auditing (ISA) 600 (Revised), Group Audits. The revised standard addresses special considerations that apply to audits of group financial statements (group audits). ISA 600 (Revised), Group Audits, includes a robust risk-based approach to planning and performing a group audit. It becomes effective for audits of group financial statements for periods beginning on or after December 15, 2023.

IESBA expands universe of entities that are public interest entities

The International Ethics Standard Board for Accountants (IESBA) released a revised definition of a public interest entity (PIE) together with other revised provisions in the International Code of Ethics for Professional Accountants (including International Independence Standards). The revised provisions specify a broader list of categories of entities as PIEs whose audits should be subject to additional independence requirements to meet stakeholders’ heightened expectations concerning auditor independence when an entity is a PIE. The revised PIE definition and related provisions become effective for audits of financial statements for periods beginning on or December 15, 2024. Early adoption is permitted and encouraged.

Looking beyond 2023: IESBA calls for stakeholder input on future strategy

The IESBA released a public survey seeking broad stakeholder input to inform the development of its Strategy and Work Plan (SWP) 2024-2027. The survey seeks input from all stakeholders on what key trends, developments, or issues the IESBA should consider as it begins the process of developing its SWP 2024 – 2027. Survey responses are requested by July 8.

IFIAR 2021 Annual Report

The International Forum of Independent Audit Regulators (IFIAR) released its 2021 Annual Report.

IOSCO releases report on issues and considerations of market data in secondary equity markets

The International Organization of Securities Commissions (IOSCO) published a report that sets out some issues and considerations for regulators when reviewing the regulation of market data. The report highlights that market data is an essential element of efficient price discovery and for maintaining fair and efficient markets.

IFAC releases new implementation tool for auditors

The International Federation of Accountants (IFAC) released a new resource, Auditing Accounting Estimates: ISA 540 (Revised) Implementation Tool. It will help auditors implement the IAASB’s  ISA 540 (Revised), Auditing Accounting Estimates and Related Disclosures by providing an overview of steps practitioners could take and related considerations. The implementation tool contains “what,” “why,” and “how” suggestions.

​​​​The Center for Audit Quality is an autonomous, nonpartisan, nonprofit organization dedicated to enhancing investor confidence and public trust in the global capital markets by fostering high-quality public company audits; collaborating with other stakeholders to advance the discussion of critical issues; and advocating policies and standards that promote public company auditors’ objectivity, effectiveness and responsiveness to dynamic market conditions. Based in Washington, D.C., the CAQ is affiliated with the American Institute of CPAs. 

The CAQ Public Policy and Technical Alert (PPTA) is intended as general information and should not be relied upon as being definitive or all-inclusive. As with all other CAQ resources, this is not authoritative and readers are urged to refer to relevant rules and standards. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The CAQ makes no representations, warranties, or guarantees about, and assumes no responsibility for, the content or application of the material contained herein and expressly disclaims all liability for any damages arising out of the use of, reference to, or reliance on such material. This publication does not represent an official position of the CAQ, its board, or its members.

Questions and comments about the Public Policy & Technical Alert can be addressed to Matt Sickmiller, Senior Manager, Professional Practice (msickmiller@thecaq.org).