The regulatory landscape for accountants and auditors continues to rapidly evolve with unprecedented rulemaking activity. In this blog we’ll explore the SEC's agenda and the implications for professionals, alongside heightened scrutiny from the PCAOB and updates from the AICPA Auditing Standards Board (ASB).
SEC regulatory landscape
Accountants and auditors should anticipate ongoing regulatory changes in 2024 as the SEC continues its rulemaking efforts. SEC Chair, Gary Gensler, has surpassed his predecessors in terms of rulemaking pace.
This acceleration is evident in the chart below, comparing the rate of rulemaking during the first 33 months of Gary Gensler's tenure with that of his predecessors.
In our 2023 webinar, SEC Reporting and Hot Topics, we delved into some of the SEC's most recent activities, including
- Finalized rules on cybersecurity, pay vs. performance, and claw-back policies
- Recent statements on risk assessment
- Various updates, including CD&Is and climate activity
- SEC comment letter trends and recent enforcement actions
If you're interested, you can watch the webinar recording for free here.
Latest from the PCAOB
Given the evolving regulatory landscape, audit teams face increasing demands to ensure their audits are up to snuff. Audit quality is a big theme and according to recent inspections, improvements can certainly be made.
In the 2022 inspection cycle, the PCAOB found deficiencies in 40% of reviewed audits, up from 34% in 2021 and 29% in 2020.
PCAOB Chair Erika Williams remarked,
These findings are absolutely unnacceptable, and audit firms must make changes to turn things around and live up to their responsibility to investors. "
Consequently, the PCAOB has been particularly active. According to a PCAOB news release in November 2023, “the Board has taken more formal actions on standard setting and rulemaking than in any year in the last 10 years, issuing four proposals—with one more expected before year's end—and adopting a final confirmation standard and related amendments (previously stalled since 2010)".
In our free, annually updated comprehensive eBook, we cover the most recent inspection reports. It not only summarizes the primary areas of audit deficiencies but also includes valuable insights from former PCAOB inspection leaders, Helen Munter and John Fiebig. Our upcoming 6th edition, expected for release in May 2024, will analyze the 2022 inspections reports of annually inspected audit firms, following our previous 5th edition, published in May 2023, which examined the 2021 reports.
AICPA AUditing Standards Board (ASB)
Similar to the PCAOB, the AICPA Auditing Standards Board (ASB) aims to serve the public interest by developing, updating, and communicating comprehensive standards and practice guidance. An example is the recently released Statement of Auditing Standards (SAS) No. 145, Understanding the Entity and its Environment and Assessing the Risks of Material Misstatement which is in effect for this year’s audits.
SAS 145 addresses concerns identified in AICPA peer review data, with nearly half of reviewed audits found to be “nonconforming” due to inadequate procedures surrounding a client’s system of internal controls.
In a recent blog post, we highlighted the top 5 considerations for engagement teams to ensure compliance with SAS 145's new requirements. We then dove deeper into these considerations and the impact SAS 145 will have on audit engagements in our SAS 145 webinar. A free recording of this webinar is available to watch now!
Looking ahead to 2024, the prevalence of audit deficiencies and the uptick in rulemaking suggest a continued focus on audit quality and further scrutiny of auditors.
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