By Allison M. Henry, CPA, CGMA, PICPA Vice President – Professional and Technical Standards

On March 28, 2023, the Public Company Accounting Oversight Board (PCAOB) issued a proposal that would revise the auditing guidance for audits performed in accordance with its standards. The revisions reiterate foundational principles, including exercising due professional care, using professional skepticism, maintaining competence and independence throughout the audit and professional engagement period, and ensuring adequate supervision from the engagement partner. The proposal also includes a requirement to finalize audit documentation within 14 days of engagement sign-off, down from 45 days. This is a significant change that signals a shift toward more timely regulatory monitoring in an effort to enhance the protection of investors’ interests.  

Erica Y. Williams, chair of the PCAOB, noted the following: “It is critical that the documentation is completed as close in time as possible to the completion of the audit. The PCAOB cannot begin an inspection until a complete and final set of audit documentation is assembled. Proposing to advance the documentation completion date from 45 to 14 days would enable the PCAOB to potentially begin our inspection process sooner. This would lead to a ‘waterfall effect’ that ultimately would provide the opportunity for us to get our inspection reports to investors sooner; enhancing their protection.”

This view is reminiscent of AICPA’s Practice Monitoring of the Future concept, which proposed a continuous monitoring process of audit engagements. Considered a bit provocative at the time of the proposal, it was designed with the goal of improving audit quality by using emerging technologies and a risk-based approach to selecting firms and/or specific engagements needing greater monitoring focus. Firms receiving results that indicated that their performance was not in compliance with the standards would have to go through additional monitoring until performance improved. While the automated monitoring system that the AICPA envisioned has not been implemented, to some degree AICPA’s broad initiative to enhance audit quality has resulted in more timely remediation and a recent survey of AICPA peer reviewers suggests that audit quality is improving.

Will the trend of more timely regulatory monitoring and remediation one day transition to a system of continuous monitoring? It may be hard to envision this now, but with small changes in technology this concept is attainable. For now, though, how do you feel about the 14-day documentation completion date? Is it reasonable? Let me know what you think by emailing me at ahenry@picpa.org or calling me at (215) 972-6187.

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Statements of fact and opinion are the authors’ responsibility alone and do not imply an opinion on the part of the PICPA's officers or members. The information contained herein does not constitute accounting, legal, or professional advice. For actionable advice, you must engage or consult with a qualified professional.