The PCAOB (Public Company Accounting Oversight Board) released a draft of its five-year strategic plan for public review on Tuesday.
In a press release, PCAOB Chair Erica Williams said, "The people we serve are top of mind in everything we do at the PCAOB, and we look forward to hearing from the public as we move forward with our ambitious plan to protect investors."
Comments must be submitted by September 15th.
The investor protection, engagement, and flexibility organizational priorities of the PCAOB are included in the draft strategy along with the following four key objectives:
Modernizing standards: The PCAOB's near-term agenda includes improvements to financial reporting and the auditing profession, as well as a review of current standards that may be out-of-date and the adoption of new or updated ones to address emerging risk areas. Adopting clear, enforceable criteria that enhance audit quality is one step toward achieving this objective, which will allow the board to monitor compliance through inspections.
The goal is for standards to be adaptable to various public companies' and audit firms' sizes. The PCAOB has historically been too sluggish to update standards, so last month Gary Gensler, chair of the Securities and Exchange Commission (SEC), urged it to move fast in this area.
The board plans to assess whether standards need to be updated to account for the increased use of technology by public businesses and auditors as part of this objective. The PCAOB has come under fire for not having updated auditing standards to handle the risks associated with using data analytics and emerging technologies and to keep up with changes made by both preparers and auditors.
Enhancing inspections: According to the draft strategy, one of the board's most crucial instruments for safeguarding investors is the PCAOB's inspection process for public accounting firms. This objective calls for high-quality audit quality inspections of enterprises' adherence to laws, regulations, and standards; increased transparency, promptness, and usefulness of inspection reports; and publication of guidance based on inspection observations of both shortcomings and best practices.
The PCAOB also aims to publish information regarding companies that have not resolved matters to the board's satisfaction, as well as a greater emphasis on firms' attempts to promptly address quality control objections and flaws in their systems.
Increasing enforcement: According to the draft strategy, "Assertive enforcement and meaningful sanctions for those who violate the rules also deter wrongdoing." In remarks made in the open last month, Williams made it apparent that the PCAOB "means business" when it comes to "those who break the rules."
The following actions are suggested to achieve this goal: increased cooperation with other regulators, including the SEC and international counterparts; concurrent enforcement actions against auditors and audit firms; increased transparency about settled audit enforcement actions by naming names and providing details; more significant fines, suspensions, and other forms of relief.
Improving organizational effectiveness: The PCAOB wants to invest in its people, including employee retention and recruiting, and boost staff engagement through professional development, flexible work arrangements, and diversity and inclusion efforts, in order to meet its mission and strategic objectives. In order to "become more agile," the firm also plans to enhance its internal procedures.
Enhancing stakeholder participation is this goal's other component. Making external engagement an institutional competence and a program through which the PCAOB solicits and receives feedback from stakeholders and communicates its story are the board's stated goals. Investors, investor advocates, audit firms and committees, financial statement preparers, academics, Congress, and other regulators are examples of stakeholders.
The PCAOB has not traditionally been known for interacting with financial statement preparers, preferring to concentrate on their auditors and audit committees.
The board wants to continue having conversations with these parties and get their opinions on the standards it sets. In addition to forming advisory groups, it has also employed an associate director for stakeholder engagement and an investor advocate. It aims to develop an investor education program and give investors more approachable information.
The PCAOB has previously come under fire for its lack of innovation and for having an inspection procedure that failed to give audit companies timely and helpful input to raise the caliber of their audits. The board now has four out of five new board members, including a new chairwoman, in place after years of uncertainty. The PCAOB's tactics and activities are being rigorously scrutinized, according to the SEC.
It is important to keep an eye on the PCAOB's draft plan for comments and whether the new board will succeed in fostering "high-quality auditing through forward-looking, responsive, and innovative oversight."
By fLEXI tEAM