Statement On Amendments Related To Aspects Of Designing And Performing Audit Procedures That Involve Technology-Assisted Analysis Of Information In Electronic Form, SEC Commissioner Mark T. Uyeda, Washington D.C., Aug. 20, 2024

Thank you, Chair Gensler, and thank you to the staff for your presentation.

The third item on today’s agenda is a set of amendments designed to revise and conform PCAOB standards affected by auditors’ expanded use of technology-assisted analysis as part of their audit. Updating standards to keep pace with rapidly evolving uses of technology is both necessary and challenging. The types of technology or technology-assisted analysis meant to be captured by a standard today could become obsolete next year. Accordingly, a principles-based, rather than prescriptive, approach to standard setting is more ideal to ensure that the standards continue to be effective and avoid obsolescence.

The PCAOB states that today’s amendments are principles-based.[1] However, some market participants noted in their comments to the Commission that the final standard relating to evaluating the reliability of external information provided in electronic form may require a much more prescriptive approach.[2] These commenters interpreted the final standard as requiring the auditor to test all information in electronic form that the company provided to it, regardless of the auditor’s risk assessment.[3] The commenters noted that this approach seemed to contradict the PCAOB’s intent for a scalable, risk-based approach and called for implementation guidance from the Board.[4]

Evaluating whether a PCAOB standard clearly communicates to market participants their obligations is part of the Commission’s oversight responsibility when deciding whether to approve the standard. Based on language contained in the adopting release for the amendments, the Commission does not believe that the PCAOB intended for a prescriptive approach to testing external information provided in electronic form.[5] However, given commenters’ concerns, the Commission encourages the PCAOB to provide implementation guidance on this issue.[6]

In light of the Commission’s acknowledgment of commenters’ concerns and its call for implementation guidance, I support the amendments related to standards involving technology-assisted analysis. I look forward to seeing the PCAOB’s guidance.

Before concluding, I would like to acknowledge the importance of ensuring that both the Commission’s and the PCAOB’s rules keep pace with technology. While today’s amendments were intended to address only one area of auditor’s use of technology, several commenters called for the PCAOB to undertake a broader review of how technology, including artificial intelligence, affects audits.[7] Although this broader study of technology was outside the scope of today’s amendment, the PCAOB has created a Technology Innovation Alliance Working Group to evaluate the use of emerging technologies in the audit space.[8] I look forward to seeing the recommendations from this group.

Thank you to the PCAOB’s members and staff and the Commission staff, especially those from the Office of the Chief Accountant and the Office of the General Counsel.