Since Erica Williams became chair of the Public Company Accounting Oversight Board in January, the organization has taken a proactive stance towards its mission of holding corporate auditors accountable. To that end, the PCAOB released what it called an “ambitious” five-year strategic plan last month. Perhaps in a shot at previous PCAOB leadership, the plan features numerous references to the board’s role in “protecting investors.”
Here’s a rundown of the four goals laid out for the PCAOB in the document.
The PCAOB has already pledged to “establish and maintain high-quality auditing and related professional practice standards for audits of public companies, as well as of registered broker-dealers” through an array of projects. They include a handful of short-term assignments to be completed this year or next, such as evaluating and strengthening quality control standards and considering changes to the confirmation process. Projects with longer timelines include looking into revisions of auditors’ responsibilities in cases of fraud and potentially beefing up firms’ obligations “to better promote compliance through improved ethical behavior and independence.” The board is also conducting research projects to evaluate how to adapt to the growing use of new technologies in audit work.
The strategic plan also notes that the PCAOB wants to affirm “clear and scalable” standards that account for different sizes of firms and audit complexities.
This goal fits with Williams’ tough talk about PCAOB’s role. For example, the plan nods to the need for the board to improve the quality of its reviews of work done by audit firms. Additionally, PCAOB is calling for streamlining of its review processes to ensure it is producing reports on its inspections in a timely fashion.
(Check out Intelligize’s just-published breakdown on the PCAOB’s efforts to reinvigorate audit inspections.)
On a related note, the strategic plan points to embracing “assertive enforcement and meaningful sanctions for those who violate the rules” to deter auditor malfeasance. What would a more assertive approach to enforcement look like? The document is vague in that regard, but it does refer to imposing tougher penalties on rule-breakers. It also calls for more transparency around its enforcement efforts and collaboration with other regulatory agencies.
Improve organizational effectiveness
The most ambiguous of the four goals is the last one listed in the strategic plan. Essentially, improving organization effectiveness consists of making life better for the PCAOB’s employees. Apparently, the board intends to do that by “increasing employee engagement.” That means implementing some of the strategies used in the corporate world to improve employee retention and productivity, such as promoting diversity and inclusion, offering more opportunities for professional development, and facilitating flexible working arrangements.
Furthermore, the PCAOB says it intends to work more effectively through better stakeholder engagement. This explains the reintroduction of advisory groups at the board, for example. The board also has designs on conducting more outreach and deploying more public education campaigns.