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Earlier this week, the PCAOB announced that it had proposed amendments to its standards to address auditor responsibilities when using technology-assisted analysis of information in electronic form. The deadline for public comment on the proposal is August 28, 2023. The proposal includes changes to update aspects of AS 1105, Audit Evidence, and AS 2301, The Auditor’s Responses to the Risks of Material Misstatement. In the announcement for this proposal, the PCAOB notes:

The proposal seeks to improve audit quality by reducing the likelihood that an auditor who uses technology-assisted analysis will issue an opinion without obtaining sufficient appropriate audit evidence. In particular, the proposal would bring greater clarity to auditor responsibilities in the following areas:

• Using reliable information in audit procedures: Technology-assisted analysis often involves analyzing vast amounts of information in electronic format. The proposal would emphasize auditor responsibilities when evaluating the reliability of such information. For example, when auditors test a company’s controls over electronic information, their testing should include controls over the company’s information technology related to such information.
• Using audit evidence for multiple purposes: Technology-assisted analysis can be used to provide audit evidence for various purposes in an audit. For example, performing risk assessment procedures when planning an audit and performing substantive procedures in response to the auditor’s risk assessment. The proposal would specify that if an auditor uses audit evidence from an audit procedure for more than one purpose, the auditor should design and perform the procedure to achieve each of the relevant objectives.
• Designing and performing substantive procedures: When designing and performing substantive procedures, auditors can use technology-assisted analysis to identify transactions and balances that meet certain criteria and warrant further investigation. For example, auditors can identify all transactions within an account processed by a certain individual or exceeding a certain amount. The proposal would clarify the factors the auditor should consider as part of that investigation, including whether the identified items represent a misstatement or a control deficiency or indicate a need for the auditor to modify its risk assessment or planned procedures.

– Dave Lynn