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Discover how to combat financial fraud effectively with the Anti-Fraud Collaboration and the CAQ. Our resources emphasize four crucial themes in fraud prevention: promoting skepticism, fostering an ethical culture, risk management, and utilizing emerging technologies. Learn to detect and deter fraud more proficiently with our comprehensive guides and resources.

Lucy Wang is Director, Anti-Fraud Initiatives at the Center for Audit Quality. In this role since 2019, Wang serves as a subject matter expert on issues related to fraud deterrence and detection. Wang is responsible for leading technical and policy-oriented projects while working closely with representatives from the Anti-Fraud Collaboration, task forces, and the broader profession. Wang manages the development of thought leadership, reports, and other resources that address current financial reporting fraud issues.

Before joining the CAQ, Wang served as Manager at PwC’s Forensic Services practice based in Washington, DC and Shanghai, China, where she assisted Fortune 500 companies with their global compliance programs, cross-border M&amp;A transactions, large scale risk assessments, regulatory investigations, and litigation support. Wang executed complex investigations involving cases such as financial statement fraud, misappropriation of assets, bribery, and corruption. Wang also led numerous anti-corruption and fraud risk assessments globally, including in Asia Pacific, Africa, and Europe.

Wang is a Certified Fraud Examiner, and she holds a BS in finance and accounting from New York University’s Leonard N. Stern School of Business.

Lucy Wang, CFE

Companies that swiftly transitioned to remote work during the pandemic are now exploring ways to bring employees back to the office full-time, implement hybrid models, or establish long-term remote work policies. These changes present new challenges in maintaining an ethical...

Companies that swiftly transitioned to remote work during the pandemic are now exploring ways to bring employees back to the office full-time, implement hybrid models, or establish long-term remote work policies. These changes present new challenges in maintaining an ethical organizational culture to proactively deter and detect fraud.

As a partner of the <a href="https://antifraudcollaboration.org/">Anti-Fraud Collaboration (AFC),</a> the Center for Audit Quality (CAQ) advances discussions among all members of the financial reporting ecosystem about ways to strengthen fraud prevention, and corporate culture is a key pillar.

The AFC’s latest resource, <a href="https://antifraudcollaboration.org/the-impact-of-a-changing-work-environment-on-corporate-culture/"><em>The Impact of a Changing Work Environment on Corporate Culture</em></a>, offers valuable insights and actionable guidance for organizations looking to strengthen their culture and anti-fraud efforts while navigating an evolving work environment.

Keep reading for my key takeaways from the report.
<h3><strong>Adapting Corporate Culture in a Changing Work Environment</strong></h3>
An organization’s culture evolves alongside workplace expectations and business practices. As organizations navigate shifts in the work environment, many employees—including managers—may feel disconnected or uncertain about their roles. According to human resources and culture subject matter experts, employees are increasingly looking for flexibility, autonomy, and empathy in the workplace. It is critical for leaders to balance these expectations while preserving a strong corporate culture.

The prolonged period of remote work, combined with a new generation entering the workforce, has changed how employees perceive corporate culture. In a <a href="https://www.mckinsey.com/mgi/our-research/empty-spaces-and-hybrid-places">McKinsey &amp; Company study</a>, 10% of workers worldwide said they would likely quit their jobs if they were required to work at the office every day. They also agreed that they would forgo more than 20% of their compensation to work the right number of days at home.

Companies have faced pushbacks in response to return-to-office mandates, in some cases leading to increased turnover, lower job satisfaction, and other potential unforeseen consequences. It is important to recognize the considerable impact of demographics on employees’ attitudes and experiences with regards to remote, hybrid, and in-person work, and remain flexible when making workplace decisions for a broad employee base.

[custom_quote text="10% of workers worldwide said they would likely quit their jobs if they were required to work at the office every day."]
<h3><strong>Reinforcing Ethical Culture in a Hybrid Work Environment</strong></h3>
A strong ethical culture must be reinforced through deliberate actions, especially in a changing workplace.

A few of these strategies include revisiting the hiring process regularly to ensure it aligns with the work environment, assigning a peer mentor to help new employees navigate the company culture and foster connections virtually, and emphasizing achievements and employees’ positive impact on the organization, while avoiding micromanaging employees’ work.

Additionally, organizations should readily and continually assess the unique impact new working models have on their governance, risk management, and control processes to ensure that cultural integrity remains intact.

[custom_quote text="Assign a peer mentor to help new employees navigate the company culture and foster connections virtually."]
<h3><strong>How Changes in Work Environment Impact Fraud Risks</strong></h3>
As work environments continue to evolve, the risk of fraud can increase in unexpected ways. Employees who feel disconnected from their organizations while working remotely may be more likely to rationalize fraudulent behavior, and they may find it easier to perpetuate fraud or engage in misconduct without being caught.

According to the <a href="https://legacy.acfe.com/report-to-the-nations/2024/">Association of Certified Fraud Examiners (ACFE)</a>, the most common behavioral red flag for fraud is an employee living beyond their means. In a traditional office setting, coworkers and managers may notice signs such as expensive purchases or lavish vacations. In a remote environment, these warning signals are often more difficult to detect. The absence of casual, spontaneous in-person contact to build relationships among employees may also weaken employees' sense of connection to their company and its ethical culture.

Strengthening accountability, reinforcing ethical values, and fostering a culture of integrity—whether in-person or virtual—will be critical to identify and mitigate fraud risks in the modern workplace.

[custom_quote text="Employees who feel disconnected from their organizations while working remotely may be more likely to rationalize fraudulent behavior."]
<h3><strong>Fraud Prevention Through Culture and Risk Management</strong></h3>
An ethical corporate culture can mitigate the pressures that lead to fraud through strong risk management practices and appropriate incentives. However, in a time of constant disruption and changing work environments, management must regularly assess emerging risks and adjust their monitoring strategies accordingly.

Organizations should consider a variety of tools to enhance their culture and deter fraud and misconduct, including:
<ul>
 	<li>Robust internal controls, policies, and processes</li>
 	<li>Applying the elements of the fraud triangle in risk assessment</li>
 	<li>Employee surveys and culture metrics to measure sentiment</li>
 	<li>Leveraging technology for fraud detection</li>
 	<li>Encouraging teamwork and cross-functional collaboration</li>
 	<li>Setting a strong tone at the top</li>
 	<li>Implementing whistleblower and ethics hotlines</li>
 	<li>Effective change management strategies</li>
</ul>
There is not a one-size-fits-all approach to establishing a strong ethical culture, particularly in today’s eclectic work environment. However, by leveraging these tools and techniques, organizations can create a solid foundation that fosters, reinforces, and enhances ethical behavior across the workforce.

A strong ethical culture not only deters fraud but also strengthens trust among different stakeholder groups. By embracing flexibility, reinforcing core values, and implementing effective fraud prevention strategies, organizations can navigate the complexities of today’s business and regulatory landscape while upholding the highest standards of integrity.

As the fraud risk landscape continues to evolve, I encourage your organization to review how its risk management practices and incentives can be enhanced to foster a strong culture. Make sure to follow the <a href="https://antifraudcollaboration.org/">AFC</a> on <a href="https://twitter.com/antifraudcollab">X</a> and <a href="https://www.linkedin.com/company/antifraudcollaboration/">LinkedIn</a> to stay up to date on the latest resources to deter and detect fraud.

[custom_quote text="There is not a one-size-fits-all approach to establishing a strong ethical culture."]

The Future of Work: Enhancing Corporate Culture to Deter and Detect Fraud

Anti-Fraud

Blog Post

In today’s rapidly evolving financial reporting and regulatory environment, fraud remains an ever-present threat, requiring vigilance and adaptation.

As the Director of Anti-Fraud Initiatives, I engage in meaningful conversations with a diverse group of stakeholders within the financial reporting ecosystem year-round...

In today’s rapidly evolving financial reporting and regulatory environment, fraud remains an ever-present threat, requiring vigilance and adaptation.

As the Director of Anti-Fraud Initiatives, I engage in meaningful conversations with a diverse group of stakeholders within the financial reporting ecosystem year-round to stay up to date on all issues related to fraud. At the Center for Audit Quality (CAQ), we recognize that the fight against fraud requires the collective effort of everyone within the financial reporting profession.

During the 2024 International Fraud Awareness Week, the CAQ, as a partner of the <a href="https://antifraudcollaboration.org/">Anti-Fraud Collaboration (AFC)</a>, hosted its inaugural Fraud Forum. This multi-stakeholder dialogue brought together key players from across the financial reporting ecosystem, in addition to investors and regulators, to explore emerging fraud risks, discuss best practices, and strengthen fraud deterrence and detection.

Read on for my takeaways from this special event.
<h3><strong>The Evolving Fraud Risk Landscape</strong></h3>
The fraud risk landscape grows more complex every day. Emerging risks such as geopolitical instability, third-party vulnerabilities, and challenges within the talent pipeline present new concerns that require fresh perspectives. Approaching these holistically ensures that fraud deterrence and detection strategies evolve alongside the shifting landscape.

In our discussions at the Fraud Forum, we learned that while fraud risk is inherent in capital markets, massive fraud is not pervasive across corporate America. However, too much emphasis is often placed on the likelihood of fraud rather than its potential impact. Companies should instead consider the potential impact of fraud to strengthen their deterrence and detection efforts.

According to the Association of Certified Fraud Examiners (ACFE)’s <a href="https://www.acfe.com/-/media/files/acfe/pdfs/rttn/2024/2024-report-to-the-nations.pdf">Occupational Fraud 2024: A Report to the Nations</a>, public companies have a better chance of detecting fraud sooner compared to other organizations. Anti-fraud controls embedded in an organization’s policy and practices can help proactively protect against fraud, including:
<ul>
 	<li>Code of conduct</li>
 	<li>Management certification of financial statements</li>
 	<li>Hotline</li>
 	<li>Internal audit department</li>
</ul>
[custom_quote text="While fraud risk is inherent in capital markets, massive fraud is not pervasive across corporate America."]
<h3><strong>Fraud Prevention: The Human Element</strong></h3>
Throughout my conversations with colleagues and subject matter experts, one theme consistently stands out: The human element is crucial in the fight against fraud.

Fraud is not just an accounting or technical issue; it is fundamentally a human problem. Culture and ethics play a critical role in mitigating fraud risk. A company’s ethical environment must be cultivated from the top down, promoting transparency, accountability, and integrity across all levels.

Additionally, hotlines and reporting mechanisms are essential tools in detecting fraud and should be widely utilized. Companies can also encourage employees to speak up and use whistleblower data to effectively offer valuable insights into risk areas. Consequently, organizations with strong internal reporting mechanisms tend to experience better business outcomes and lower fraud risks.

[custom_quote text="Hotlines and reporting mechanisms are essential tools in detecting fraud and should be widely utilized."]
<h3><strong>Strengthening Fraud Detection and Response</strong></h3>
Investor expectations regarding fraud detection are evolving. According to the CAQ’s 2024 <a href="https://www.thecaq.org/institutional-investor-survey-q4-2024">Institutional Investor Survey</a>, over half of investors believe that fraud goes undetected in the U.S. corporate reporting ecosystem.

Enhancing communication between investors and auditors, refining fraud-related procedures, and leveraging technology in fraud detection are vital steps. At the Fraud Forum, participants shared some practical steps to bolster fraud detection, including:
<ul>
 	<li>Enhancing fraud brainstorming sessions by involving forensic experts regularly.</li>
 	<li>Strengthening fraud inquiries with more open-ended questioning to uncover potential misconduct.</li>
 	<li>Investing in technology and data analytics to improve fraud detection and response times.</li>
 	<li>Assessing and utilizing hotline data more effectively to identify risk patterns and inform audit procedures.</li>
 	<li>Improving training and education to equip accounting and auditing professionals with the knowledge and skills needed to recognize fraud risks.</li>
</ul>
[custom_quote text="Investor expectations regarding fraud detection are evolving."]
<h3><strong>The Road Ahead</strong></h3>
The fight against fraud requires a collective effort from all members of the financial reporting ecosystem. While regulation and enforcement play crucial roles, transparency and collaboration are equally important.

The CAQ and AFC remain dedicated to convening these essential multi-stakeholder dialogues and driving meaningful change. As we look ahead, organizations must stay proactive, continually assess fraud risks, and implement innovative strategies to further strengthen fraud deterrence and detection.

The productive dialogue from the inaugural Fraud Forum is just the beginning. We invite financial reporting ecosystem stakeholders, regulators, and investors to join us in this ongoing effort to uphold the integrity of our capital markets. Together, we can build a stronger, more fraud-resilient future.

I encourage you to follow the <a href="https://antifraudcollaboration.org/">AFC </a>on <a href="https://twitter.com/antifraudcollab">X</a> and <a href="https://www.linkedin.com/company/antifraudcollaboration/">LinkedIn</a> to stay up to date on the latest anti-fraud issues and developments.

<span data-teams="true">You can read the full Fraud Forum summary <a href="https://antifraudcollaboration.org/fraud-forum-summary/">here</a>.</span>

Strengthening Fraud Deterrence and Detection: Key Insights from the AFC Fraud Forum

The Role of the Auditor: Assessing and Responding  to Fraud Risk provides insights into practices, tools, and considerations that can help auditors, especially those with less experience, enhance their professional skepticism and overall approach to assessing and responding to...

The Role of the Auditor: Assessing and Responding  to Fraud Risk

Auditors

Policymakers

Audit Committee

Investors

Publications

Audit Quality

headshot_2024_mcgowan_dennis

Headshot_2024_McGowan_Dennis

Dennis McGowan CPA

Vice President, Professional Practice and Anti-Fraud Initiatives, CAQ

andi-mcneal-150x225

Andi McNeal CFE, CPA

Chief Training Officer, ACFE

Introduction
In March 2024, the Association of Certified Fraud Examiners (ACFE) released Occupational Fraud 2024: A Report to the Nations (report). The cases in this report were submitted by Certified Fraud Examiners (CFEs) throughout the world who each responded to the...

<h3><strong>Introduction</strong></h3>
In March 2024, the Association of Certified Fraud Examiners (ACFE) released <a href="https://www.acfe.com/-/media/files/acfe/pdfs/rttn/2024/2024-report-to-the-nations.pdf"><em>Occupational Fraud 2024: A Report to the Nations</em></a> (report). The cases in this report were submitted by Certified Fraud Examiners (CFEs) throughout the world who each responded to the ACFE’s 2023 <em>Global Fraud Survey</em>, answering a detailed questionnaire with 86 questions about one fraud case they investigated between January 2022 and September 2023. Drawing from 1,921 occupational fraud cases investigated by CFEs, this 13th edition of the ACFE’s study presents statistical analyses related to the methods used to commit, detect, and prevent occupational fraud, as well as the fraud perpetrators, the organizations they victimized, the losses those organizations suffered, and their responses to the frauds.

<strong><em>In this blog, we explore what this report means for all stakeholders with a responsibility for fighting fraud. </em></strong>
<h3><strong>Checks and balances</strong></h3>
Before diving into the report, it is important to understand the system of checks and balances in our U.S. capital markets. In a recent <a href="https://thecaq.wpenginepowered.com/wp-content/uploads/2023/11/caq_perspectives-on-corporate-reporting-the-audit-and-regulatory-environment_2023-11.pdf">survey</a> conducted by the Center for Audit Quality (CAQ), we found that investors have an overall positive view of corporate reporting in the U.S. – believing that the system of checks and balances that is in place delivers reliable information. This has not always been the case. In the early 2000s, public confidence in the U.S. capital markets was notably undermined. A series of significant frauds at large public companies resulted in corporate giants like Enron and WorldCom collapsing, with devastating losses for employees and investors. In the wake of these calamities, there was public debate to understand what went wrong and what needed to be done to restore public confidence in our capital markets and protect investors.

The result was definitive legislative action that resulted in the near unanimous approval of the Sarbanes-Oxley Act of 2002 (SOX). These provisions recognized that audit quality was not solely the responsibility of auditors, and that no one stakeholder in the U.S. financial reporting ecosystem alone could produce both high-quality financial reporting and high-quality audits. Rather, it takes regulators, company management, audit committees, and external auditors all working in concert. Over two decades since its passage, SOX is recognized around the world for its effectiveness in promoting trusted financial reporting and high-quality audits.

[custom_quote text="A series of significant frauds at large public companies resulted in corporate giants like Enron and WorldCom collapsing, with devastating losses for employees and investors."]
<h3><strong>Fighting fraud takes everyone</strong></h3>
High-quality financial reporting and high-quality audits depend on all stakeholders in the financial reporting ecosystem. Similarly, protecting companies and investors from fraud requires the collective effort of all stakeholders. Gurbir Grewal, Director of the Securities and Exchange Commission (SEC) Division of Enforcement has stated that “restoring trust requires more than SEC enforcement actions. We must all work together to ensure companies are following the rules. […] When gatekeepers are living up to their obligations they serve as the first lines of defense against misconduct.”<sup>1</sup>
<h3><strong>Fraud detection</strong></h3>
In the ACFE’s 2024 <em>Report to the Nations</em>, the most common way a fraud came to light was through a tip from a whistleblower (43% of cases). The next two most common sources of fraud detection were internal audit (14%) and management (13%). External auditors detected fraud in 3% of the cases in the ACFE’s study. Some may look at this statistic and question whether auditors are fulfilling their responsibility to detect a material misstatement as a result of fraud. As CPAs, we know how much effort our profession puts forth to fulfill their professional responsibilities, including designing and executing audit procedures that are responsive to the assessed risks of material misstatement from fraud. We also know that even the highest-quality audits are only one component of a comprehensive anti-fraud program. In fact, external auditors are the last line of defense in many cases, due to the timing and scope of their engagements. So, to us, 3% of fraud cases being detected by external audit means that our system of checks and balances is working. In other words, a number much higher than 3% would mean companies are not taking the layered, proactive steps necessary to prevent and detect frauds.

[custom_quote text="As CPAs, we know how much effort our profession puts forth to fulfill their professional responsibilities, including designing and executing audit procedures that are responsive to the assessed risks of material misstatement from fraud."]
<h3><strong>Active fraud detection methods</strong></h3>
To further explore the role and effectiveness of various fraud detection mechanisms, the ACFE report analyzes the median loss and duration of frauds based on how they were uncovered. Their findings emphasize that proactive fraud detection efforts are essential to protecting against fraud risk in general. Active detection methods — such as thorough management review, account reconciliation, and surveillance/monitoring — are associated with much faster detection and much lower fraud losses than passive detection methods (e.g., the perpetrator confessing, or the victim being notified of the fraud by law enforcement). Organizations can dramatically reduce the impact of fraud by implementing internal controls and policies that actively detect fraud.

With active detection methods being so critical to early detection, companies have invested billions of dollars in systems to support strong fraud risk management programs that include internal controls and policies to achieve that goal. According to one report, companies spent up to $44 billion globally on fraud detection and prevention programs in 2023.<sup>2</sup> As the ACFE report shows, programs that support internal parties detecting fraud — whether through employee tips, management review, or internal audit — increase the likelihood that the fraud will be detected sooner and minimize the losses incurred. When the external auditor is the one identifying the fraud, it often means the early detection methods have not worked, and it is likely the fraud has gone on for a longer duration, resulting in higher losses to the company and ultimately investors.
<h3><strong>A closer look at frauds detected by the external auditor</strong></h3>
New in this year’s study, survey respondents who selected that the fraud was detected by the external auditors were asked, “Through which audit procedure(s) did the external auditors first discover the fraud?”

<img class="alignnone size-full wp-image-15096" src="https://www.thecaq.org/wp-content/uploads/2024/06/2024_06_Fighting-Fraud-Chart-1.png" alt="" width="561" height="325" />
<h3><strong>Standard audit procedures</strong></h3>
More than half (58%) of the respondents where the fraud case was identified by the external auditor noted that the fraud was detected though standard audit procedures. Maintaining professional skepticism throughout the audit helps auditors remain vigilant to indicators of a possible misstatement due to fraud. The evidence that auditors gather throughout the audit does not always corroborate the anticipated results or available information. Disconfirming evidence obtained might also provide reasons to question the results or information. Check out this resource, <a href="https://caqantifraprod.wpenginepowered.com/wp-content/uploads/2022/02/afc_skpeticism-in-practice_2020-09.pdf"><em>Skepticism in Practice</em></a>, from the Anti-Fraud Collaboration (AFC) to learn more about maintaining professional skepticism.

[custom_quote text="The evidence that auditors gather throughout the audit does not always corroborate the anticipated results or available information. "]
<h3><strong>Fraud inquiries</strong></h3>
The next most common way external auditors discovered frauds was through fraud inquiries (33%). Auditors should approach fraud inquiries with professional skepticism and consider ways to enhance their inquiries.
<ul>
 	<li>Consider who should be part of the fraud inquiry. Some research <a href="https://www.journalofaccountancy.com/news/2023/jan/auditing-best-practices-what-academic-fraud-research-reveals.html">suggests</a> that fraud inquiries conducted by two auditors can influence deceptive members of management to talk more freely and perhaps make them more likely to reveal information related to fraud.</li>
 	<li>Consider when to conduct the inquiry. There is research that <a href="https://www.journalofaccountancy.com/news/2023/jan/auditing-best-practices-what-academic-fraud-research-reveals.html">suggests</a> interviewees are more likely to “let their guard down” in inquiries that take place later in the afternoon when they are tired.</li>
 	<li>Consider resources available on common fraud schemes to enhance the auditor’s assessment of fraud risk, which can also assist the auditor in designing and performing fraud inquiries responsive to those common fraud schemes. In addition to the ACFE’s <a href="https://www.acfe.com/-/media/files/acfe/pdfs/rttn/2024/2024-report-to-the-nations.pdf"><em>Occupational Fraud 2024: A Report to the Nations</em></a>, auditors can look to <a href="https://caqantifraprod.wpenginepowered.com/wp-content/uploads/2021/06/afc-mitigating-the-risk-of-common-fraud-schemes-2021-01.pdf"><em>Mitigating the Risks of Common Fraud Schemes: Insights from SEC Enforcement Actions</em></a> from the AFC, which analyzes 531 accounting and auditing enforcement action releases (AAERs) related to financial statement frauds. This study provides observations on higher-risk areas susceptible to common fraud schemes.</li>
</ul>
<h3><strong>The value of audits in the fraud landscape</strong></h3>
In addition to examining how frauds were detected, the ACFE report explores the anti-fraud controls that were in place at the victim organization when the fraud occurred. External audits of the financial statements were the second most common anti-fraud control (84% of cases), surpassed only by a code of conduct (85% of cases). The ACFE also took a closer look at how the presence or absence of various anti-fraud controls related to the median loss and duration of the frauds in their study. Organizations that included external audits as part of their anti-fraud programs had losses that were 52% smaller and caught frauds twice as fast as organizations that did not undergo audits. This further reinforces the value of high-quality audits as part of a comprehensive approach to managing fraud risk.

<img class="alignnone size-full wp-image-15097" src="https://www.thecaq.org/wp-content/uploads/2024/06/2024_06_Fighting-Fraud-Chart-2.png" alt="" width="405" height="138" />
<h3><strong>Conclusion</strong></h3>
The AFC is dedicated to advancing the discussion of critical anti-fraud efforts and developing resources focused on enhancing the effectiveness of financial fraud risk management. The ACFE’s <a href="https://www.acfe.com/-/media/files/acfe/pdfs/rttn/2024/2024-report-to-the-nations.pdf">report</a> is a valuable tool to understand fraud that has been perpetrated, how it was detected, and the ultimate impact of the fraud schemes. We agree with Paul Munter, SEC Chief Accountant, Office of the Chief Accountant, who has <a href="https://www.sec.gov/news/statement/munter-statement-fraud-detection-101122">stated</a>, “Auditors are gatekeepers and therefore the importance of their responsibilities with respect to the identification of risks of material misstatement due to fraud and the detection of material misstatements in the financial statements due to fraud should not be underestimated.” This year’s ACFE report confirms that external auditors do identify fraud. It also confirms that companies with active and holistic programs to detect instances of fraud can minimize the duration and losses of fraud. All stakeholders can benefit from understanding the findings in the ACFE’s report and what it means for their role in fighting fraud.

&nbsp;

<hr />

<strong>Endnotes</strong>
<h6>1. See <a href="https://www.sec.gov/news/speech/grewal-sec-speaks-101321">SEC.gov | Remarks at SEC Speaks 2021</a>.</h6>
<h6>2. See <a href="https://www.fortunebusinessinsights.com/industry-reports/fraud-detection-and-prevention-market-100231">Fraud Detection and Prevention Market Growth Report [2030] (fortunebusinessinsights.com)</a>.</h6>

Fighting Fraud: A Shared Responsibility

We are pleased to submit the attached comment letter written in response to the PCAOB’s reopening of the comment period on its proposed Amendments to PCAOB Auditing Standards related to a Company’s Noncompliance with Laws and Regulations and Other Related...

<span data-contrast="none">We are pleased to submit the attached comment letter written in response to the PCAOB’s </span><a href="https://pcaobus.org/news-events/news-releases/news-release-detail/pcaob-to-host-virtual-roundtable-on-noclar-proposal-reopen-comment-period-until-march-18"><span data-contrast="none">reopening of the comment period</span></a><span data-contrast="none"> on its </span><a href="https://assets.pcaobus.org/pcaob-dev/docs/default-source/rulemaking/docket-051/pcaob-release-no.-2023-003---noclar.pdf?sfvrsn=fe43e8a_2&amp;utm_source=PCAOB+Email+Subscriptions&amp;utm_campaign=98790bd37a-EMAIL_CAMPAIGN_2019--forums2019_COPY_01&amp;utm_medium=email&amp;utm_term=0_c97e2ba223-98790bd37a-125440512"><span data-contrast="none">proposed Amendments to PCAOB Auditing Standards related to a Company’s Noncompliance with Laws and Regulations and Other Related Amendments</span></a><span data-contrast="none"> and related </span><a href="https://assets.pcaobus.org/pcaob-dev/docs/default-source/news/events/noclar-roundtable/noclar-roundtable-briefing-paper.pdf?sfvrsn=6a0fd9a2_3"><span data-contrast="none">roundtable briefing paper</span></a><span data-contrast="none">.</span><span data-ccp-props="{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}"> </span>

<span data-contrast="auto">This comment letter is a supplement to the </span><a href="https://assets.pcaobus.org/pcaob-dev/docs/default-source/rulemaking/docket-051/91_caq.pdf?sfvrsn=7aea0318_6"><span data-contrast="none">letter</span></a><span data-contrast="auto"> that we submitted on August 7, 2023. We continue to echo the comments and concerns raised in that comment letter. In this letter we provide the following: </span><span data-ccp-props="{&quot;134233117&quot;:false,&quot;134233118&quot;:false,&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559738&quot;:0,&quot;335559739&quot;:0,&quot;335559740&quot;:240}"> </span>
<ul>
 	<li data-leveltext="" data-font="Symbol" data-listid="6" data-list-defn-props="{&quot;335552541&quot;:1,&quot;335559685&quot;:720,&quot;335559991&quot;:360,&quot;469769226&quot;:&quot;Symbol&quot;,&quot;469769242&quot;:[8226],&quot;469777803&quot;:&quot;left&quot;,&quot;469777804&quot;:&quot;&quot;,&quot;469777815&quot;:&quot;hybridMultilevel&quot;}" aria-setsize="-1" data-aria-posinset="1" data-aria-level="1"><span data-contrast="auto">Data we have compiled and analysis we have completed subsequent to our August 7, 2023, comment letter;  </span><span data-ccp-props="{&quot;134233117&quot;:false,&quot;134233118&quot;:false,&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559738&quot;:0,&quot;335559739&quot;:0,&quot;335559740&quot;:240}"> </span></li>
 	<li data-leveltext="" data-font="Symbol" data-listid="6" data-list-defn-props="{&quot;335552541&quot;:1,&quot;335559685&quot;:720,&quot;335559991&quot;:360,&quot;469769226&quot;:&quot;Symbol&quot;,&quot;469769242&quot;:[8226],&quot;469777803&quot;:&quot;left&quot;,&quot;469777804&quot;:&quot;&quot;,&quot;469777815&quot;:&quot;hybridMultilevel&quot;}" aria-setsize="-1" data-aria-posinset="1" data-aria-level="1"><span data-contrast="auto">Alternatives to the proposed requirements that should form the basis for further outreach and consultation by the PCAOB; and </span><span data-ccp-props="{&quot;134233117&quot;:false,&quot;134233118&quot;:false,&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559738&quot;:0,&quot;335559739&quot;:0,&quot;335559740&quot;:240}"> </span></li>
 	<li data-leveltext="" data-font="Symbol" data-listid="6" data-list-defn-props="{&quot;335552541&quot;:1,&quot;335559685&quot;:720,&quot;335559991&quot;:360,&quot;469769226&quot;:&quot;Symbol&quot;,&quot;469769242&quot;:[8226],&quot;469777803&quot;:&quot;left&quot;,&quot;469777804&quot;:&quot;&quot;,&quot;469777815&quot;:&quot;hybridMultilevel&quot;}" aria-setsize="-1" data-aria-posinset="1" data-aria-level="1"><span data-contrast="auto">Observations from the March 6, 2024 virtual roundtable.  </span><span data-ccp-props="{&quot;134233117&quot;:false,&quot;134233118&quot;:false,&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559738&quot;:0,&quot;335559739&quot;:0,&quot;335559740&quot;:240}"> </span></li>
</ul>
<span data-contrast="none">As reflected in the results of the additional data we have compiled and analysis we have completed, and based on our observations from the roundtable, there is a wide range of views with respect to where enhancements are needed in the area of NOCLAR, as well as with respect to the proposed requirements. Given the range of perspectives on current practice and the opportunities for enhancement through a revision to the standards, continued multi-stakeholder dialogue is needed so that all impacted stakeholders have clarity on objectives, expectations, and responsibilities. Additionally, in our view, the PCAOB has not yet demonstrated that they have sufficiently studied the costs and benefits of, and the alternatives to, the proposed requirements. Further study and evaluation are needed. </span><span data-ccp-props="{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}"> </span>

<span data-contrast="none">We believe that the significant and substantial nature of the changes that are likely needed to the NOCLAR proposal warrants re-exposure. We believe that an additional investment of time is needed to ensure that the effects of any changes made, including any downstream effects, are fully understood and consistently interpreted, as well as to ensure the purpose of the standard and expected changes to auditor behavior are clearly understood, that it is capable of being consistently implemented, and that it will ultimately benefit investors. </span><span data-ccp-props="{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}"> </span>

<span data-contrast="none">Read the full comment letter </span><a href="https://www.thecaq.org/wp-content/uploads/2024/03/caq_pcaob_NOCLAR_2024-03.pdf"><span data-contrast="none">here</span></a><span data-contrast="none">.</span><span data-ccp-props="{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}"> </span>

Comment Letter | PCAOB: AS 2405, A Company’s Noncompliance with Laws and Regulations

Comment Letter

Transparency and accountability are pillars of effective public policy development. Unfortunately, the roundtable that the PCAOB held this week on its proposal related to company noncompliance with laws and regulations (NOCLAR) failed to live up to these principles. Specifically, the...

<span data-contrast="auto">Transparency and accountability are pillars of effective public policy development. Unfortunately, the roundtable that the PCAOB held this week on its proposal related to company noncompliance with laws and regulations (NOCLAR) failed to live up to these principles. Specifically, the roundtable failed to address the concerns outlined in 78% of the comment letters the PCAOB received, including from those investors, audit committee members, auditors, academics and others who are concerned with the PCAOB’s proposal. </span><span data-ccp-props="{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}"> </span>

<span data-contrast="auto">“Today’s NOCLAR roundtable was a missed opportunity for the PCAOB to further understand the views highlighted in numerous comment letters from engaged stakeholders,” said Julie Bell Lindsay, Chief Executive Officer, CAQ. “Not only did the roundtable surface disagreement as to the actual scope or intention of the proposal, but we are concerned that the lack of diverse stakeholder representation – particularly from investors and audit committees, two important audiences – resulted in dialogue that did not meaningfully address stakeholder concerns. Given the discussion at the roundtable, we believe that the appropriate response is to re-propose the standard, with an economic analysis, to begin to address these concerns.”</span><span data-ccp-props="{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}"> </span>

<span data-ccp-props="{&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}"> </span>

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