Financial Reporting and Regulatory Update

Second Quarter 2021

From the PCAOB

New acting chair and search for new board candidates

On June 4, 2021, the SEC announced that Duane M. DesParte would serve as acting chair of the Public Company Accounting Oversight Board (PCAOB), replacing William D. Duhnke, effective immediately. DesParte has been a member of the PCAOB since early 2018. In addition to this change, the SEC, which selects all members and the chair of the PCAOB, announced that it will be seeking candidates for all five board positions and on June 8, 2021, Chair Gensler announced the commencement of the appointment process.

New standards advisory group

At its meeting on March 29, 2021, the PCAOB unanimously approved the formation of a new standards advisory group (SAG) that will increase stakeholder engagement and provide opportunities for investors and other stakeholders to advise the PCAOB on key initiatives.

As detailed in its charter, the purpose of the SAG is to advise the PCAOB on:

  • Existing auditing and related attestation standards as well as quality control, ethics, and independence standards
  • Proposed standards
  • Potential new or amended standards
  • Matters other than standards that are significant to the PCAOB

The SAG will perform specific tasks assigned by the PCAOB, and task forces of the SAG will play a critical role in deliberating, producing deliverables, and sharing information on key issues.

The charter establishes an 18-person group of experts, with representatives from the investor community (five), external auditors (four), audit committee members or directors (three), financial reporting oversight personnel (three), and academics and others with specialized knowledge (three).

On April 12, 2021, the PCAOB announced that it was seeking nominations for the SAG for both the 2021-2023 term and the 2021-2024 term. Nominees must meet certain qualifications described in the SAG charter. The deadline for nominations was June 14, 2021.

Staff outlook and audit committee resources on 2021 inspections

On April 6, 2021, the PCAOB issued two documents to help auditors and audit committees understand the PCAOB’s 2021 inspection focus.

Spotlight: Staff Outlook for 2021 Inspections” provides information auditors might find useful as they plan and perform current and upcoming audits. The document addresses the principal changes the PCAOB plans for 2021 inspections and areas of planned inspection focus:

  • Audit areas with continued deficiencies
  • Firms’ quality control systems
  • How firms comply with auditor independence requirements
  • Fraud procedures
  • Critical audit matters
  • How firms implement new auditing standards
  • Supervision of audits involving other auditors
  • Responding to cyber threats
  • Auditing digital assets

Audit committees can use the “Staff Outlook” with the companion “Audit Committee Resource: 2021 Inspections Outlook” to engage in meaningful dialogue with their auditor.