In recent years, auditors have expanded their use of data analytics. This trend has been driven both by advances in data analysis tools and increased access by auditors to large volumes of company- and third-party-generated data.
Where existing auditing standards designed for another era fall short of their potential to help auditors improve audit quality, it makes sense to adapt them to current realities. Audit procedures that rely on data analytics but that are not appropriately designed or executed, may not yield the audit evidence required by current auditing standards.
The PCAOB’s (the “Board”) proposed updates will assist auditors in better analyzing information in electronic form with technology-based tools. The amendments are designed to reduce the likelihood that an auditor will issue a report without obtaining sufficient audit evidence that provides a reasonable basis for its audit opinion.
The Board has noted that the amendments will help auditors design and perform more effective audit procedures, leading to higher audit quality and benefiting investors. The updated audit standards could also result in more efficient audits and lower audit fees. And the clarity and regulatory certainty they offer could encourage auditors to implement new technologies.
The Commission’s staff has determined that the Board’s amendments are consistent with Title I of the Sarbanes-Oxley Act and associated rules and regulations. Following its own thorough review of the Board’s efforts, and extensive engagement with the Board throughout the process, Commission staff has also determined that the amendments are necessary or appropriate in the public interest or for the protection of investors. The staff is therefore recommending Commission approval.
I am pleased to find myself in agreement with the staff recommendation and pleased to support these sensible amendments that will yield principles-based standards designed to be adaptable to future changes in technology and that improve the reliability of financial reporting.
