State Board Report
Common projects and concerns were discussed at a meeting on May 18 of Public Company Accounting Oversight Board Members and NASBA representatives. NASBA Chair Telford Lodden (IA), President and CEO Ken Bishop and Executive Vice President and COO Colleen Conrad summarized NASBA’s activities for PCAOB Chair James R. Doty and Members Lewis H. Ferguson and Jeanette M. Franzel. The focus of NASBA’s Standard Setting Advisory Committee on data analytics was mentioned, as on May 12 the PCAOB had released a briefing paper on “The Use of Data Technology in Audits,” in preparation for the May 24-25 meeting of its Standing Advisory Group. Although the use of data analytics may enhance audit quality and make the audit more efficient, the paper cites associated risks. These include the ability to:
The increasing use of technology has raised new issues for regulators trying to perform effective oversight and enforcement, both the NASBA and PCAOB meeting attendees agreed.
While there has been some exchange of information among groups studying data analytics, the field is moving fast, and firms do not want to supply details that potentially could benefit other firms. However, the CPA firms’ greatest competition is coming from Silicon Valley, not other firms, many said. Tools are being developed by IT firms that can give good assurance, and much of the software is client-based, not CPA-based.
President Bishop and Chair Doty agreed to cooperate on assessing the impact of data analytics on regulation and will share information in that regard. Chair Doty affirmed that NASBA should be folded into the PCAOB’s ongoing research.
Besides both NASBA and PCAOB studying data analytics, in December 2016, the PCAOB added NOCLAR to its research agenda. The staff is exploring whether there is a need for changes to AS 2405, Illegal Acts by Clients, to improve direction to auditors as to their responsibilities with respect to illegal acts. At the May meeting, it was agreed that NASBA will be talking to PCAOB staff studying this topic too.
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