Adrian JohnsonTLDR:
- SEC approved new audit quality benchmarks
- New standards aim to address poor quality audits
Wall Street’s top regulator approved new accounting standards set by the PCAOB, tightening rules and standards to improve audit quality. Despite Republican objections, the new standards will require accounting firms to manage risks and hold audit firm leadership accountable. The new standard is set to take effect in December of next year.
Full Article:
On Monday, the U.S. Securities and Exchange Commission (SEC) approved new accounting standards set by the Public Company Accounting Oversight Board (PCAOB) to address concerns about poor quality audits. The SEC vote was 3-2, with Republican members objecting to the hasty drafting process and potential burdens on smaller audit firms. The PCAOB, created after the Enron-era scandals, aims to tighten accounting rules and standards this year.
SEC Chair Gary Gensler highlighted that 46% of auditing engagements in 2023 fell short of obtaining sufficient evidence, prompting the need for new standards. The new standard, adopted by the PCAOB in May, will require accounting firms to identify, manage, and monitor risks to audit quality control while holding audit firm leadership accountable for compliance.
Republican objections focused on the rushed production process and potential burdens on smaller audit firms, including the requirement to design compliant quality control systems even when not auditing subjects to PCAOB standards. Despite these objections, the new standard is set to take effect in December of next year, aiming to improve audit quality across the industry.
