This comment letter is a supplement to the comment letters we submitted to the PCAOB on June 7, 2024 in response to recent Public Company Accounting Oversight Board (PCAOB or the Board) Proposals, Firm and Engagement Metrics and Firm Reporting (Proposals or Proposed Requirements). We continue to echo the points raised in those comment letters.
Understanding the information needs of a broad range of investors and audit committee members when it comes to evaluating audit firm and audit engagement performance is important to establishing PCAOB requirements that can achieve their intended benefits.
In the interest of further understanding the information needs of audit committee members and investors, we have conducted two surveys – one of audit committee members and one of investors – to gather data to understand how they currently evaluate the quality of the external audit and oversee and evaluate the auditor. The purpose of this supplemental letter is to share the results of these surveys, and within them the views of nearly 250 audit committee members and 100 investors, as the PCAOB determines its next actions with respect to these and other standard-setting projects. The survey results, in their entirety, are included in the Appendix.
Key findings
When taken together, there are five key findings:
- More research is necessary to establish whether evidence supports the need for and benefits of proposed metrics.
- Audit committees and many investors already have the information they need.
- Any reporting should be voluntary.
- Any changes to the PCAOB’s standards should promote auditor-audit committee discussion.
- A majority of investors and audit committee members are of the view that the PCAOB’s auditing standards and rules have kept pace with change and require only targeted updating.
Conclusion
The findings from these surveys provide evidence as to the validity of the concerns raised by the CAQ and other commenters as to, whether the PCAOB’s recent proposals will achieve the intended objective for investors and audit committees. These concerns include (1) the potential that publicly disclosed mandated metrics will have unintended consequences (and should therefore be voluntary) and (2) the stated benefits in each proposal’s economic analysis do not provide sufficient basis to justify their respective costs. As noted, there was disparity in what investors say would be helpful compared with what they are likely to seek out and audit committees say the information available to them to fulfill their external auditor oversight responsibilities meets most to all their needs. Accordingly, there needs to be further study and evaluation, including potential pilot testing, prior to adopting any final standard as the PCAOB’s stated value is not sufficiently supported by the expectations or needs of intended beneficiaries.
Read the full comment letter here.
Download Investor Survey Results Download Audit Committee Survey Results