Is the Public Company Accounting Oversight Board studying the right issues? PCAOB Member J. Robert Brown, Jr., has challenged the Board’s updated research and standard-setting agendas that were released in September. While the PCAOB added auditor independence to their standard-setting agenda and an audit evidence project to their research agenda, they dropped going concern from their standard-setting agenda and other information and noncompliance with laws and regulations (NOCLAR) from their research agendas. These topics were eliminated because the Board concluded “there is not a need at present to change our standards or take other action on these topics.” Projects remaining as PCAOB priorities cover quality control, other auditors, and data and technology. “With respect to investor expectations, the revised agendas mostly disregard them,” Mr. Brown observes in a heavily footnoted statement released in October 2020. He finds that what has remained on the agendas “largely overlaps with the priorities of an international standard setter. While these priorities may be good ones, the goal of global alignment and coordination should not take precedence over the expressed interests of U.S. investors.”
Prior to joining the PCAOB in December 2017, Board Member Brown was director of the corporate law program at the University of Denver Strum College of Law. In January 2019 he was named chair of the International Forum of Independent Audit Regulators (IFIAR) Investor and Other Stakeholders Working Group. His current term on the PCAOB expires October 24, 2021.
“The revised agendas are not innovative. With the exception of quality control, they fail to address the interim standards adopted by the PCAOB, leaving largely untouched the out-of-date requirements that do not adequately reflect the interests of investors and fail to take into account significant changes in the system of financial reporting that have occurred since the PCAOB opened its doors in 2003,” Board Member Brown states.
He believes the PCAOB is facing a transparency problem as it rarely holds roundtables or other public meetings to obtain feedback. “Without adequate transparency, there cannot be adequate accountability,” he warns.
Mr. Brown told a November conference of investors from around the world, “…don’t wait for the PCAOB to ask you for input or advice.” At that meeting, he said an important topic to be addressed is the role of the audit firm in providing assurance for environmental, social and governance (ESG) metrics as part of the audit. https://pcaobus.org/News/Speech/Pages/Brown-revealing-ESG-Critical-Audit-Matters.aspx.
The newest PCAOB member is Megan Zietsman, who was appointed in October. Since February 2019 she had served as the PCAOB’s chief auditor and director of professional standards. Ms. Zietsman addressed the 2019 NASBA Annual Meeting. Prior to joining the PCAOB, she was a partner in Deloitte & Touche, LLP. Her first term on the PCAOB will end in October 2025.
An open meeting of the PCAOB has been announced to consider its 2021 budget and 2020-2024 strategic plan, as well as amendments to align its independence requirements with the SEC’s rules. The public can listen in via a toll-free number 1-844-721-7237 access code 9484477. A recording of the meeting will be made available on the PCAOB website https://pcaobus.org.
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