The US Securities and Exchange Commission (SEC) has appointed a new chairman and replaced all the members of the Public Company Accounting Oversight Board (PCAOB).

The SEC appointed William Duhnke as chairman replacing Jim Doty along with  J. Robert Brown, Kathleen Hamm, James Kaiser, and Duane DesParte who replaced Steve Harris, Lew Ferguson and Jeanette Franzel. The PCAOB was established by the 2002  Sarbanes-Oxley Act to oversee the audits of public companies and broker-dealers in order to protect the interests of investors and further the public interest in the preparation of informative, accurate, and independent audit reports. The PCAOB accomplishes these goals through registering public accounting firms, setting auditing standards, conducting inspections, and pursuing disciplinary actions. The PCAOB is subject to oversight by the SEC.

Securities Exchange Commission PCAOB
SEC Chair Jay Clayton welcomed new PCAOB members

SEC chairman Jay Clayton said: “Bill, Jay, Kathleen, Jim, and Duane bring substantial experience to the Board and a shared commitment to serve in the interests of our Main Street investors. Their individual and collective talents position the PCAOB to execute its mission effectively in our local, national, and international markets.

SEC Chief Accountant Wes Bricker added, “We look forward to working with these new board members in connection with furthering the PCAOB’s central mission. The new Board members are well-qualified to lead the PCAOB as it carries out its critical role in promoting investor protection and strengthening audit quality.”

Chairman Clayton thanked the previous members of the PCAOB for their work saying they had achieved a great deal on behalf of US investors and the public, including, most recently, the adoption of a new auditor’s reporting model which he said should provide investors with meaningful additional insight into auditor-audit committee communications.

UK’s Financial Reporting Council finds investors welcome audit transparency on materiality

Investors welcome the reporting by auditors, which is unique to the UK, on the materiality threshold applied to focus their audit work, according to the Financial Reporting Council (FRC) in its latest thematic review. In this reporting, the auditors disclose what level of misstatement or omission they consider matters to users of financial statements.

The FRC said audit committees are increasingly engaging with the auditor to understand and agree the materiality threshold used. Investors and audit committees, the FRC said, would like auditors to go further in their communications, explain the rationale and impact on the focus of the audit when the materiality threshold is higher than industry norms; uses alternative performance measures as a basis; is lower in the face of internal control weaknesses or has been tailored for specific items and balances.

This latest report followed up a thematic review in 2013 before the transparency requirements were introduced. The FRC found that audit firms have improved their methodologies and guidance, particularly for certain industry sectors and first-year audits. The regulator said it remained the case that the differences in methodology, guidance and their application can result in very different thresholds between audit firms. Auditors are therefore encouraged to be more specific with audit committees and in their public reports about the materiality judgements they have made and the impact on the scope, nature and extent of their audit work. The FRC report also highlighted key messages for audit committees and audit standard setters.

Melanie McLaren, FRC’s executive director for audit and actuarial regulation, said: “In future with technological advances the importance of materiality may reduce as companies and their auditors become able to more cost-effectively, and accurately, interrogate and adjust financial information. However this is not yet the case.

“Today, the assessment of materiality drives the scope, nature and extent of the auditor’s work.  Appropriate quantitative and qualitative assessment of materiality affects audit quality.  We are pleased to see the audit firms take action following our 2013 thematic review. Auditors should be encouraged by investor feedback on the transparency afforded by UK extended auditor reports and redouble their efforts to communicate the reasons for and implications of the materiality threshold applied in specific audits.

Last Updated: 15 December 2017
Post comment

Leave a Reply