Audit regulators are circulating a slimmed-down strategic plan for public comment, giving stakeholders an opportunity to weigh in on how best to regulate public company auditing.
The Public Company Accounting Oversight Board has released a draft of its five-year strategic plan and is accepting comments on its vision for how to fulfill its duty to protect investors through quality audits. The five new members of the board embarked on a fresh start at the beginning of 2018, reaching out to both external stakeholders and internal staff to gather input on what’s working and what’s not at the regulatory operation established under the Sarbanes-Oxley Act.
The 15-page draft articulates five specific goals for the PCAOB: to drive improvement in audit quality using prevention, detection, deterrence, and remediation activities; to anticipate and respond to changes in the business environment, like new technologies and the associated risks and opportunities; to improve transparency and accessibility by being more proactive with stakeholders; to pursue operational excellence via efficiency and effectiveness; and to develop, empower, and reward people in the organization.
The five-year plan doesn’t outline any substantial changes in how the board would operate compared with approaches to date. In fact, it provides far less specificity than the 59-page five-year plan approved by the outgoing board in November 2017.
The chairman’s message preceding the former five-year plan, former Chairman James Doty listed nine priorities he believed the board should pursue in 2018, including looking for ways to automate or streamline processes, improve research and analysis, improving response to emerging trends, further developing post-implementation reviews of standards, and improving response to cyber-risks.
PCAOB’s new chairman, William Duhnke, says in his chairman’s message in the newly proposed plan that the board engaged a strategic planning consultant, hosted an anonymous public survey, and performed outreach both inside and outside the organization to determine a path forward.
As a result, Duhnke identified four areas of strategic focus: improve the approach to driving audit quality; innovate oversight activities, especially regarding inspections and standard setting; engage more with audit stakeholders, like investors and audit committees; and optimize operations and culture within the PCAOB.
The board has already indicated it is reconsidering how it conducts inspections, its highest-profile and most controversial activity to regulate the audit profession. Inspection reports the past several years have delivered harsh findings to all major audit firms, some more than others, with little meaningful improvement in outcomes. The new board has also initiated work to identify whether to revisit auditor independence standards.
The draft strategic plan is open for comment through Sept. 10.