Audit Insider | January/February 2025

Welcome back, Audit Insiders. I hope 2025 has been a great year for everyone so far, and that we have some spring weather on the horizon. For us in the financial reporting profession, it certainly has been a busy time.

Here in Washington, D.C, the SEC has been busy with new leadership appointments, while the PCAOB has been sharing resources for audit firms. At the CAQ, my colleagues have been equally busy, from releasing the 2025 Audit Committee Practices Report to analyzing the latest S&P 500 10-K disclosure forms. Is it really only Q1?

Lastly, we launched the Audit Effect to spotlight the enduring, critical, and ever-evolving role of assurance to our economy. Here at the CAQ, we know that our economy relies on auditor independence, expertise, and oversight to maintain trust in our capital markets, unique qualities that set auditors apart from other assurance providers.

Read on for the latest issues I’m tracking, resources from the profession to assist financial reporting stakeholders, and more about the Audit Effect.

Please note that these perspectives are my own. If this email was forwarded to you, subscribe here so that you never miss a public company auditing update.

We’re closely monitoring these proposals and others from audit regulators and standard setters:

SEC

SEC Announces Acting Chair Mark Uyeda and Chief Accountant Ryan Wolfe

Shortly after assuming office, President Trump designated SEC Commissioner Mark Uyeda as Acting Chairman of the SEC. Acting Chair Uyeda has since announced several new acting senior staff, including Acting Chief Accountant Ryan Wolfe, who previously served as Chief Accountant in the SEC’s Division of Enforcement.

• CAQ take: We look forward to working with Acting Chair Uyeda and Acting Chief Accountant Wolfe as the public company audit profession continues to adapt and innovate to mee the needs of our capital markets while retaining their integrity and reliability in the face of new challenges.

Acting SEC Chairman delivers remarks at the Investment Company Institute’s 2025 Investment Management Conference

Mark Uyeda, Acting Chair of the SEC delivered remarks at an ICI conference earlier this month. The central theme to his speech was a blueprint for the SEC rulemaking process. He stated concerns he expressed with SEC rulemaking during the past four years and described changes during that period as “rulemaking shortcuts,” taken in the name of expediency. He went on to state, “One of my objectives will be to set forth a blueprint for restoring the Commission’s rulemaking process to the gold standard among regulatory agencies.”

• CAQ take: We have shared concerns about the pace of PCAOB’s standard-setting and rulemaking process for the last several years in comment letters. The CAQ has long been supportive of the PCAOB’s strategic goal to modernize standards. However, in recent comment letters to the PCAOB and SEC the CAQ has drawn attention to the and the historically short comment periods as well as the opportunity for further stakeholder engagement and input prior to adopting final rules and standards.

Acting SEC Chairman issues statement on SEC’s Climate-Related Disclosure Rules

Earlier this month, Acting Chair Uyeda asked the 8th Circuit Court of Appeals to delay proceedings on the consolidated lawsuits against the SEC’s climate disclosure rule. Citing concerns over the SEC’s authority and process to develop and implement the rule, as well as the impact of the rule on capital markets, Acting Chair Uyeda decided to request a delay in court proceedings to allow for the SEC to further consider the rule.

• CAQ take: While the future of the SEC’s Climate Disclosure Rules is uncertain, many U.S. entities will be subject to sustainability-related reporting requirements by other regulatory bodies. Even in the absence of any regulatory requirements, investors continue to demand insight into climate-related risks and opportunities.

SEC Announces Creation of Crypto Task Force

In addition, Acting Chair Uyeda created a new crypto task force, led by SEC Commissioner Hester Peirce. The task force is tasked with building a comprehensive crypto asset regulatory framework to bring clarity on oversight, registration, and enforcement when it comes to crypto assets.  Recently, Commissioner Peirce issued a statement seeking the public’s input on a range of issues surrounding these assets, including commonly accepted practices for auditing and accounting for crypto asset investments and transactions and valuation matters.

Safeguarding Crypto Assets: SEC SAB 121 Rescinded

SEC Staff Accounting Bulletin (SAB) 121 has rescinded. SAB 122 was published in the Federal Register on January 30, 2025, and is effective for annual periods beginning after December 15, 2024. Early adoption is permitted, meaning those reporting entities that have not filed (or issued) their financial statements and early adopt SAB 122 would not include the safeguarding liability and corresponding assets (or any of the SAB 121 required disclosures) in their 2024 financial statements.

PCAOB

PCAOB’s Firm and Engagement Metrics, Firm Reporting Proposals Withdrawn

Earlier this month, the SEC announced that the PCAOB withdrew its final rules on firm and engagement metrics and firm reporting, which had been submitted to the SEC for approval late last year. Given the concerns expressed by many commenters, the CAQ appreciates this decision.

• CAQ take: As we previously noted in our comments to the SEC and PCAOB, in our research, investors and audit committees expressed mixed opinions on the utility, value, and likely use of the proposed metrics and other required disclosures, with 70% opposing firm and engagement metrics while 85% opposed firm reporting. We also recently submitted comment letters on behalf of our smaller firm task force (SFTF) and audit committee council (ACC), which highlighted similar concerns.

New Edition of Audit Focus Series Provides PCAOB Staff Insights for Auditors Regarding Journal Entries

In January, the PCAOB posted Audit Focus: Journal Entries, a new edition of its Audit Focus series. This edition of Audit Focus highlights key reminders for auditors from the PCAOB standards related to the testing of journal entries, provides the staff’s perspective on common deficiencies made by auditors, and shares good practices that PCAOB staff have observed.

PCAOB Staff Report Shares Reminders, Good Practices, and Other Considerations for Audit Firms Using the Work of Specialists

The PCAOB released a new staff Spotlight report, “Considerations for Audit Firms Using the Work of Specialists.” This Spotlight highlights recent staff observations that are designed to help audit firms ensure appropriate procedures are performed when using the work of a specialist.

PCAOB Posts New Knowledge Checks to Help Auditors Gauge Understanding of New Quality Control and New Confirmation Standards

The PCAOB posted a new series of knowledge checks designed to help auditors gauge their understanding of important aspects of QC 1000, A Firm’s System of Quality Control. Topics covered in the knowledge checks include risk assessment, roles and responsibilities under QC 1000, considerations related to ethics and independence, and more.

Additionally, the PCAOB posted a new knowledge check designed to help auditors gauge their understanding of important aspects of AS 2310, The Auditor’s Use of Confirmation. This new standard replaces an interim standard, AS 2310, The Confirmation Process, and is effective for audits of financial statements for fiscal years ending on or after June 15, 2025.

• CAQ take: These knowledge checks are the latest in a series of resources the PCAOB has recently released to assist and inform auditors in their implementation of new PCAOB standards and rules. Supporting implementation of new standards is important for audit quality.

PCAOB Shares New Resource Page for Smaller Audit Firms

In January, the PCAOB launched a new online resource page: Information for Smaller Firms. Recently, the PCAOB has enhanced its focus on smaller firms with a range of initiatives. Building on previous efforts, the smaller firm resource page includes links to Audit Focus publications and videos, recordings of recent presentations from PCAOB forums for auditors of smaller businesses and broker-dealers, and a signup form for a new PCAOB Communications to Small Audit Firm Practitioners mailing list.

IAASB

International Auditing and Assurance Standards Board (IAASB) and IESBA Unveil New Standards and Guidance to Strengthen Sustainability Reporting and Assurance

The IAASB and the IESBA announced the launch of an integrated effort to support the effective implementation of their landmark standards aimed at advancing trust and transparency in sustainability reporting and assurance. In jurisdictions adopting the standards, both IAASB’s International Standard on Sustainability Assurance 5000 (ISSA 5000) and IESBA’s International Ethics Standards for Sustainability Assurance (including International Independence Standards ((IESSA)) become effective for periods starting on or after December 15, 2026, with early adoption permitted and encouraged.

IESBA

The International Ethics Standards Board for Accountants (IESBA) Launches Standard-Setting Project on Accounting Firm Culture and Governance

In January, the IESBA launched a standard-setting project on accounting firm culture and governance. The project aims to develop a principles-based culture and governance framework for accounting firms that promotes, supports, and reinforces a high standard of ethical behavior across all their professional services.

Audit Quality

Audit quality in the U.S. remains high, but in light of economic uncertainty, emerging developments, and demands on talent, audit practitioners should stay vigilant of the latest developments impacting audit quality. Read on for recent news, tools, and resources.

The 2025 Audit Committee Practices Survey Report is Here!

The fourth edition of the Audit Committee Practices Report, a joint effort between Deloitte’s Center for Board Effectiveness (Deloitte) and the CAQ, is now available! Key takeaways include:

• Cybersecurity remains the top priority for audit committees at public companies, outside of financial reporting and internal controls, with 93% of respondents ranking it among their top three priorities.
• Increased understanding of the impact and usage of AI, with the number of respondents who identified AI governance as a priority growing year over year, jumping to 35% from 20% last year.
• When presented with strategies to enhance audit committee effectiveness, more than two-thirds of respondents (69%) felt meetings might be improved by implementing strategies, including increasing the quality of presentations and better engagement during meetings.

For additional insights, take a look at our findings.

The Evolving Role of the Auditor

As investor demand evolves, so does the role of public company auditors. The CAQ is dedicated to providing resources to keep you up-to-date on trending topics in corporate reporting.

Welcome to the Audit Effect

Confidence powers markets. That’s the Audit Effect.

My fellow audit insiders know that for our capital markets to function, investors and workers must trust that the information coming from companies is accurate and reliable. Independence, objectivity, and skepticism are core CPA principles. These qualities, along with an unwavering commitment to continuous quality improvement and an obligation to protect the public interest, guide the judgment and performance of auditors and, in turn, strengthen our economy. The Audit Effect reiterates the critical value that assurance and public company auditors provide in creating trust in our capital markets.

Auditor assurance gives everyone who participates in our economy the confidence they need to make critical decisions. Take a look at how the Audit Effect ripples through our economy to create opportunity for everyone and join the conversation.

CAQ’s Analysis of S&P 500 Companies’ 10-K Disclosures: Climate and AI

Here at the CAQ, we regularly analyze S&P 500 companies’ disclosures to understand corporate reporting trends and emerging areas of investor interest and provide recommendations to support all members of the profession.

In an ever-changing reporting environment, climate and AI are among the hottest topics for financial reporting professionals. In our latest analysis of Form 10-Ks, we dived into disclosure trends on climate-related information. Given the integration of artificial intelligence (AI) across organizations, for the first time this year, we also reviewed AI disclosures in 10-K filings.  In an Audit in Action blog, my colleague, Desiré Carroll, shares her takeaways and key observations.

Deterring and Detecting Fraud

To elevate the profession’s understanding of fraud and the vital role that auditors play in this landscape, the CAQ collaborates with the Anti-Fraud Collaboration (AFC) to produce insights and actionable recommendations to strengthen the profession against fraud risk.

The CAQ and AFC Hosted the Inaugural Fraud Forum

Last December, during the 2024 International Fraud Awareness Week, the CAQ and the Anti-Fraud Collaboration (AFC) hosted the first-ever Fraud Forum. We convened a robust multi-stakeholder dialogue among members of the financial reporting ecosystem, where participants discussed the current and future state of the fraud risk landscape, explored the prevalence of financial reporting fraud, considered existing roles and responsibilities, and shared insights into key considerations for strengthening fraud deterrence and detection practices. This is a dialogue we need to be reviewing and having often to stay on top of fighting fraud. Take a look at the key takeaways here.

In each edition, we feature leaders in the audit profession. This month, we are featuring our new Professional Practice Fellow, Star Yuan, CPA. Star is a Professional Practice Fellow at the CAQ and a Senior Manager at KPMG. Star helps guide the CAQ’s professional practice and public policy activities as part of her fellowship.

She brings the CAQ nearly 12 years of public company auditing experience.Star is originally from Denver and moved to New York for a rotation in KPMG’s national office, where she rotated through groups like inspections, inquiries, and audit. She lives in New York with her husband and dog.

Read on for my Q&A with Star:

What led you to a career in accounting? 
Growing up, I don’t think I knew a single accountant. I distinctly remember that when the song 1985 was popular, I had no idea what the reference to CPA in that song meant. I was originally an economics major, but I took my intro to accounting class in the business school and realized that I enjoyed something that many of my classmates were struggling with. That inspired me to add accounting as a major, and along the way, I came to appreciate the opportunities that come through accounting (I’m proof that the accounting firm recruiting machines work!). I was surprised that accounting wasn’t just about sitting in a corner crunching numbers but instead it was about working in a team and building relationships, understanding technology, critical thinking, reading, and writing – all things that I’d always enjoyed.

What is your favorite aspect of being an accountant?
Accounting has given me exposure to many experiences that I wouldn’t otherwise have had. I’ve been able to travel to interesting countries and meet people from around the world. I love that every day is different – once you’ve mastered something, there is something else to move on to, or something changes that forces you to rethink what you thought you knew. The dynamic nature of the profession and the need to always be on your toes is exciting. Learning about different clients, industries, and processes and designing different audit approaches is really engaging, and working with great people who are bright, motivated, and engaged is the cherry on top.

What led you to participate in the CAQ’s fellowship? What do you hope to learn or accomplish? 
As part of my national office rotation, I gained valuable experience working on standard proposals and implementation. It was interesting to not only interpret the language but also work through the process: listening to new perspectives, debating those points with my peers, and reaching consensus as well as articulating those observations in a clear, concise, and impactful way (I was able to put my childhood speech and debate skills to work). I wanted to be able to see a side of the profession that wasn’t reflected in the day-to-day of auditing and client service and be able to step back and take a higher-level view of our profession, and get more of an understanding of the “how” and “why” of the things we do.

You live in New York. For first time visitors, what is a “must do” that you would recommend? 
Even after almost 2 years, I still feel pretty new to New York. There’s so many incredible things to do that I couldn’t possibly cover everything (or at least that’s how I’ll get out of leaving someone’s favorite spot off the list!). However, I’ll share a couple of our go-to quick eats places that we’ve discovered around the city:

Events & Webinars

CAQ and NACD Host Audit Committee Effectiveness Webinar on Latest Publication

Do you want to learn additional insights from the 2025 Audit Committee Practices Report? Join us for a discussion on April 8. Based on survey findings, this webinar will offer audit committee members and those who work with them an opportunity to hear about committee priorities, challenges, and opportunities, as well as leading practices around audit committee effectiveness. My colleague, Vanessa Teitelbaum, will be joined by Krista Parsons, Tony Anderson, and Karen Golz. I hope to see you there!

See you next month Audit Insider.

Dennis McGowan

Vice President, Professional Practice and Anti-Fraud Initiatives