Public Policy and Technical Alert | January 2022
Friday, February 4, 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.
Anthony Thompson and Erica Williams sworn in as PCAOB board member, chair
The PCAOB announced that Anthony Thompson and Erica Williams were sworn in as board member and chair, respectively. The SEC conducted the swearing-in ceremonies virtually. Thompson, who was appointed by the SEC last November, will have an initial term running through October 24, 2022. Williams, who was also nominated last November, will have an initial term running through October 24, 2024.
PCAOB to form two new advisory groups to enhance engagement with investors and other stakeholders
The PCAOB announced the creation of two new advisory groups: the Investor Advisory Group (IAG) and the Standards and Emerging Issues Advisory Group (SEIAG). The advisory groups will enable the PCAOB to obtain essential input and insights from investors and other stakeholders on a wide variety of matters related to improving audit quality. The IAG will advise the PCAOB on matters concerning the PCAOB’s mission to oversee the audits of public companies, and related matters (such as the audits of broker-dealers), to protect the interests of investors and further the public interest in the preparation of informative, accurate, and independent audit reports. The SEIAG will advise the PCAOB on existing standards, proposed standards, potential new standards, and potentially on matters other than standards that are of significance to the PCAOB, including emerging audit issues. Nominations are due February 28th.
2022-2023 IAASB Work plan approved pending PIOB approval
The International Auditing and Assurance Standards Board (IAASB) approved a new work plan, A Public Interest Focus in Uncertain Times, during its December 2021 meeting. Pending approval by the Public Interest Oversight Board (PIOB), anticipated in early April 2022, the new work plan emphasizes sustainability and environmental, social, and governance (ESG) assurance. It also highlights candidate topics in the Audit and Review space that the IAASB will consider for a further project to commence in 2023. A key focus will remain audits of financial statements of less complex entities, audit evidence, going concern, and fraud.
FRC releases a three-year plan and budget to prepare for the transition to ARGA
The Financial Reporting Council (FRC) published its three-year plan for 2022-2025. The plan acknowledges the FRC’s continued commitment to being an effective and transparent regulator as it prepares to transition to the Audit, Reporting, and Governance Authority (ARGA). In setting out this plan, the FRC has considered how, and when, it will need to increase the capacity to adapt to new powers and responsibilities.
IAASB releases conforming and consequential amendments aligning existing IAASB standards to new, revised quality management standards
The IAASB released further conforming and consequential amendments to the IAASB’s standards resulting from the new and revised quality management standards, which were released in December 2020. The conforming amendments remove actual or perceived inconsistencies between the IAASB’s suite of standards and the quality management standards. The change is designed to allow the IAASB’s full suite of standards to operate in conjunction with each other and without confusion.
FRC: New research with audit committee chairs published
The FRC published new research that reinforces the case for developing standards for audit committees to help promote a more consistent approach to audit quality. The research, conducted by YouGov, was based on in-depth interviews with audit committee chairs discussing how they carry out their role. The research shows that some audit committee chairs find it difficult to differentiate audit quality from the quality of service provided by their audit firm. The research also found that auditors have adapted quickly to the challenges posed by the pandemic.
Q&A: IAASB head on audit’s role in combating fraud, ESG, new technologies, and more
Tom Seidenstein, the chair of the IAASB, participated in a Q&A with Compliance Week to discuss current and future efforts to improve audit quality, the biggest challenges to audit confidence today, and what emerging issues might be around the corner.
Discussion document: Monitoring inflation in certain countries, November 2021
The CAQ published inflation data to assist registrants in monitoring inflation statistics in connection with their determination of the inflationary status of countries in which they have operations. The CAQ’s International Practices Task Force compiled cumulative inflation data by country (for those countries for which the International Monetary Fund publishes data), and then categorized the countries based on their cumulative inflation rates and the implementation guidance in ASC 830. The task force also identified countries where projected cumulative inflation rates would have been categorized into categories considering the guidance in ASC 830 and in circumstances where there was not consistent reliable data.
Audit Committee Practices Report: Common threads across audit committees
Deloitte and the CAQ published a report providing information related to certain issues facing audit committees today and how their peers may be responding. The report is based on a survey of 246 audit committee members from predominantly large public companies based in the United States. The survey inquired about areas of oversight, key risks, and audit committee practices.
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 (firstname.lastname@example.org).