Financial Reporting and Regulatory Update

Second Quarter 2022

From the PCAOB

New advisory groups

The PCAOB has completed its selection process and announced, on May 9, 2022, the members of its two new advisory groups – the Investor Advisory Group (IAG) and the Standards and Emerging Issues Advisory Group (SEIAG). The members’ service will begin immediately. Board member Kara M. Stein will serve as the acting IAG co-chair. Barbara Vanich, acting chief auditor, will serve as the chair of the SEIAG.

The PCAOB held its first meeting of the IAG on June 8, 2022. Topics included the PCAOB strategic plan for 2022 through 2027, the standard-setting agenda, and the IAG going forward.

The first meeting of the SEIAG was held virtually on June 15, 2022. Following a similar format to the IAG meeting, the SEIAG discussed the PCAOB strategic plan and standard-setting agenda.


New requirements for lead auditor’s use of other auditors

The PCAOB, on June 21, 2022, adopted amendments to its auditing standards to strengthen requirements that apply to audits involving multiple audit firms. The amendments are intended to improve the quality of audits where other accounting firms or individual accountants perform work on the audit. The amendments detail certain procedures for the lead auditor to perform when planning and supervising an audit that involves other auditors, and they apply a risk-based supervisory approach to the lead auditor’s oversight of other auditors for whose work the lead auditor assumes responsibility.

The amendments are subject to approval by the SEC and will be effective for audits of financial statements for fiscal years ending on or after Dec. 15, 2024.

Updates to standard-setting and research agenda

On May 4, 2022, the Office of the Chief Auditor (OCA) of the PCAOB released updated standard-setting and research agendas. The agendas are designed to further the PCAOB’s objective of advancing audit quality to protect the interests of investors and to further the public interest in the preparation of informative, accurate, and independent audit reports.

The agendas are the result of the PCAOB’s assessment of priorities that support the board’s goals. The standard-setting agenda includes six short-term projects where the Office of the Chief Auditor expects PCAOB action during the coming 12 months. These six projects include other auditors, quality control, noncompliance with laws and regulations, an attestation standards update, going concern, and confirmations. The agenda also includes four short midterm projects on substantive analytical procedures, fraud, interim ethics and independence standards, and interim standards. The research agenda includes a project on data and technology and a project on audit evidence.

Requests for comments on estimates and specialists audit requirements

On April 12, 2022, the PCAOB issued a request for comment on the initial impact of new requirements for auditing accounting estimates and using the work of specialists. Comments and other information obtained will be evaluated to determine whether additional guidance or other steps are appropriate.

Comments were due June 10, 2022.