PCAOB Releases New Audit Committee Resource for 2023

PCAOB Releases New Audit Committee Resource for 2023

Blog Keeping Current: Disclosure and Governance Developments

The PCAOB recently released a new Audit Committee Resource, which sets forth an updated set of questions that audit committee members may want to consider incorporating into their ongoing engagement with auditors. (See our prior August 2022 post.) The updated questions fall into the following categories: risk of fraud, risk assessment and internal controls, auditing and accounting risks, digital assets, merger and acquisition activities, use of the work of other auditors, talent and impact on audit quality, independence, critical audit matters, and cybersecurity.

Notably, this year’s Audit Committee Resource expands the questions within the risk of fraud category, which comes on the heels of the PCAOB’s recent proposal to amend its auditing standards related to a company’s noncompliance with laws and regulations. Additions to the list of questions include:

  • Did the auditor’s inquiries of management include whether possible illegal acts, such as potential noncompliance with sanctions and other laws or regulations, have occurred? If any acts were identified, what was the impact on the audit?
  • What procedures were performed by the auditor to address whether management perpetrated or concealed fraud by presenting incomplete or inaccurate financial statement disclosures or by omitting necessary disclosures?

This year’s Audit Committee Resource also expands upon the themes of economic uncertainty and growing business risks, with a focus on digital assets, cybersecurity, M&A, auditor independence and audit quality control. Some new questions in this regard include:

  • Have recent digital asset market developments – including recent bankruptcies – influenced the nature, timing, and extent of procedures the auditor plans to perform or performed to address the risk of material misstatement including fraud risk related to digital assets?
  • How did the auditor’s identification and assessment of possible risks of material misstatement consider changes to the cyberthreat landscape?
  • If the public company has been involved in a de-SPAC (special purpose acquisition company) transaction, what were the auditor’s key considerations in evaluating management’s determination of the accounting acquirer?
  • How did the auditor evaluate management’s assessment of the effect of a de-SPAC transaction on any pre-existing compensation agreements?
  • How does the audit firm employ automated systems or processes, if any, to identify relationships with restricted entities that may reasonably be thought to have an impact on independence?
  • Did the audit firm conduct the audit in a remote/hybrid environment? If so, how did the engagement partner ensure that the engagement team was properly supervised?

Finally, new in this year’s Audit Committee Resource are questions regarding critical audit matters (CAMs), including in regard to preliminary determinations that did not result in the reporting of a CAM.

In addition to the questions in this latest resource, audit committees may also want to consider engaging with auditors on areas of planned PCAOB inspection focus for 2023 (see PCAOB April 2023 Spotlight) and any audit-related changes that may be prompted by such focus areas.


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