In this letter, the CAQ responds to the SEC’s notice to solicit comment on the Amendments Related to Aspects of Designing and Performing Audit Procedures that Involve Technology-Assisted Analysis of Information in Electronic Form (Final Standard or Adopting Release) adopted by the Public Company Accounting Oversight Board’s (PCAOB or the Board) on June 12, 2024 (File No. PCAOB 2024 – 03) and filed with the Securities and Exchange Commission (SEC or Commission) on June 26, 2024, in Release No. 34-100430.
In our letter we bring to the Commission’s attention our concern related to the revised requirements in AS 1105.10A of the Final Standard, which significantly differs from the Proposal. As written, there appears a presumption by the Board that all external information in electronic form obtained by management has the same risk of modification. Therefore, AS 1105.10A could be interpreted that the auditor must go directly to the source of the external information and not accept any information in electronic form by itself to be used as sufficient audit evidence.
The revised language in AS 1105.10A appears contradictory to AS 1105.09 which clarifies that the auditor is “not expected to be an expert in documentation authentication.” AS 1105.09 goes on to state that it is only “if conditions indicate that a document may not be authentic or that the terms in a document have been modified but that the modifications have not been disclosed to the auditor, the auditor should modify the planned audit procedures or perform additional audit procedures to respond to those conditions and should evaluate the effect, if any, on the other aspects of the audit.”
The risk of information modification is important to consider. To comply with AS 1105.10A (a) and (b), using a risk-based approach, we agree the auditor should perform certain procedures to assess reliability of external information.
To the extent our presumption and understanding are correct, and the SEC were to affirm this intent, we support approval of the Final Standard by the SEC, subject to clarification by the PCAOB. If more extensive audit procedures are now required to address the risk of modification, we believe the economic analysis has underestimated the costs to implement the final standard. Therefore, further outreach – with both auditors and preparers – and consideration would be necessary before the Commission should approve it.
Read the full comment letter here.