Strategic plan
On Nov. 23, 2021, the PCAOB approved its fiscal year 2022 budget based on its five-year strategic plan for 2020 through 2024. The strategic plan guides the PCAOB’s programs, operations, and budget.
The plan includes the following goals:
- “Drive improvement in the quality of audit services through a combination of prevention, detection, deterrence, and remediation.”
- “Anticipate and respond to the changing environment, including emerging technologies and related risks and opportunities.”
- “Enhance transparency and accessibility through proactive stakeholder engagement.”
- “Pursue operational excellence through efficient and effective use of our resources, information, and technology.”
- “Develop, empower, and reward our people to achieve our shared goals.”
Research and standard-setting
On Dec. 7, 2021, at the AICPA-CIMA conference, PCAOB acting Chief Auditor Barbara Vanich remarked on the PCAOB’s current standard-setting agenda, which includes projects on quality control and using other auditors. Vanich also made observations about the PCAOB’s research agenda including data and technology and audit evidence.
Inspections and enforcement
Final inspection and investigations rule
On Sept. 22, 2021, the PCAOB adopted a final rule related to its responsibilities under the Holding Foreign Companies Accountable Act (HFCAA). The HFCAA requires the board to determine whether it is unable to inspect or investigate registered public accounting firms located in a foreign jurisdiction and communicate the determination to the SEC. The SEC, in certain circumstances under the law, will be required to take further action related to registrants with audit opinions rendered in those foreign jurisdictions.
The final rule was approved by the SEC on Nov. 4, 2021.
Preview of 2020 inspection observations
The PCAOB issued, on Oct. 18, 2021, a publication, “Spotlight: Staff Update and Preview of 2020 Inspection Observations,” that provides observations from the 2020 inspections of audits of issuers prior to issuance of the inspection reports, which audit committees might find useful when engaging with their auditors. The report highlights changes in the PCAOB inspection approach, common deficiencies, observations related to quality control, observations on good practices, and responses to technology developments including cybersecurity, distributed ledger technologies, and digital assets. While recurring deficiencies are similar to those in prior years, the PCAOB did observe improvements in auditing accounting estimates.
Staff observations at the AICPA-CIMA conference
George Botic, director of the Division of Inspections, and Patrick Bryan, director of the Division of Enforcement, provided perspectives at the AICPA conference. Botic addressed five topics:
- Changes made in 2021 inspections
- Recurring deficiencies (for example, business combinations, inventory, revenue, ICFR, allowance for loan and lease losses)
- Importance of firms’ quality control systems
- Forecast of 2022 focus areas (for example, impact of the current economic environment, mergers and acquisitions, supply chain disruptions, pandemic impacts, SPACs, independence due to nonaudit services, carrying broker-dealers)
- Key takeaways for participants:
- Continued importance of exercising due professional care and professional skepticism throughout the audit
- Performance of thorough and continuous risk assessment – the need for practitioners to understand the impact of known and potential changes due to current economic climate and perform procedures to address the risk
- Fraud procedures and the importance of incorporating unpredictability
Bryan discussed the enforcement division’s 2021 focus areas, significant enforcement cases, and his perspective on the enforcement outlook for 2022.
New board members
The SEC, on Nov. 8, 2021, announced the appointments of Erica Y. Williams as chair of the PCAOB and Christina Ho, Kara M. Stein, and Anthony C. Thompson as board members. Duane DesParte, current acting chair, will continue to serve in that role until Williams is sworn in. Ho was sworn in on Nov. 9 for a term that will run through Oct. 24, 2025. Stein was sworn in on Nov. 18 and will serve until Oct. 24, 2026. Thompson was sworn in on Jan. 3, 2022, and will serve until Oct. 24, 2022. Williams was sworn in on Jan. 10, 2022, and will serve until Oct. 24, 2024.
Most recently a litigation partner at Kirkland & Ellis LLP, Williams previously spent more than a decade in various roles at the SEC and served as special assistant and associate counsel to President Barack Obama. Ho, who will join the PCAOB from her position as vice president of government analytics and innovation at Elder Research, has 28 years of broad experience in public finance, policy development, accounting and auditing, disclosure modernization, data analytics, and technology innovation. Stein served as a commissioner of the SEC from 2013 to 2019 and currently is a distinguished policy fellow and lecturer-in-law at the University of Pennsylvania Carey Law School and is director of the AI, Data, and Capital Markets Initiative at the Center for Innovation, University of California Hastings Law. Currently executive director and chief administrative officer of the CFTC, Thompson previously held senior positions at the U.S. Department of Agriculture and served in the United States Air Force for 32 years.