FINANCIAL REPORTING INSIGHTS |
Authored by RSM US LLP
The Public Company Accounting Oversight Board (PCAOB) recently released its 2020 Conversations with Audit Committee Chairs. This document summarizes discussions PCAOB inspection teams had with nearly 300 audit committee chairs regarding the following topics:
- The auditor and communications with the audit committee – Audit committee chairs frequently cited both verbal and written communications with their auditors as being extremely important to audit quality and their overall relationship with their auditors. Most audit committee chairs commended their auditor’s communications, commonly sharing that they were thorough, timely and at the right level of detail and frequency. Areas for improvement included, among others:
- Managing global audit operations
- Helping more junior audit team members learn the company’s business
- Independence communications
- Increased visibility into and discussion around fee changes
- New auditing and accounting standards – In overseeing the implementation of new accounting and auditing standards, audit committees noted that the following actions, among others, worked well:
- Asking the auditors to provide the audit committee early notice and frequent updates when new standards are being implemented
- Setting aside time for educational sessions where auditors can explain and answer questions about how new audit requirements may impact the audit
- Requesting that auditors communicate their approach to, and any possible challenges associated with, the implementation of new auditing standards and auditing the implementation of new accounting standards
- Emerging technologies – Many audit committee chairs cited potential benefits from the use of emerging technologies, but also were wary of the risks that come with such technologies. They commonly noted cybersecurity risk as the thing that keeps them up at night. Another risk cited was overreliance on technology leading to less attention to or emphasis on preparer and auditor judgment, experience or professional skepticism.
This article was written by RSM US LLP and originally appeared on 2021-02-03.
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