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Yesterday, the SEC approved several rule changes proposed by the PCAOB. The changes address auditors’ general responsibilities in conducting an audit, the use of technology assisted data analysis in audits, and auditor liability. This excerpt from the SEC’s press release summarizes the new rules:

The Commission approved the PCAOB’s new AS 1000, General Responsibilities of the Auditor in Conducting an Audit, along with related amendments to other PCAOB standards, to reaffirm, consolidate, and modernize the general principles and responsibilities of the auditor when conducting an audit. These standards cover such foundational topics as affirming the auditor’s duty to protect investors through the preparation and issuance of informative, accurate, and independent auditor’s reports; the exercise of due professional care, professional skepticism, and professional judgment when performing audits; and compliance with ethics and independence rules.

In addition, the Commission approved the PCAOB’s amendments to AS 1105, Audit Evidence, and AS 2301, The Auditor’s Response to the Risks of Material Misstatement, and conforming amendments, to address the use of technology-assisted data analysis in audit procedures. The amendments specify and clarify auditors’ responsibilities when the auditor uses such analytical tools in conducting audits.

Finally, the Commission approved the PCAOB’s amendment to Rule 3502, Responsibility Not to Knowingly or Recklessly Contribute to Violations, governing the liability of an associated person of a registered public accounting firm who directly and substantially contributes to that firm’s violations of the laws, rules, and standards that the PCAOB enforces. The amendments to Rule 3502 revise from recklessness to negligence the standard for an associated person’s contributory liability, while maintaining the requirement that to be held liable, an associated person must have contributed to the firm’s violation “directly and substantially.”

Commissioner Peirce issued a dissenting statement with respect to the changes to Rule 3502, and Commissioner Uyeda did as well.  Both commissioners supported the other rule changes. PCAOB Chair Erica Williams issued her own statement in response to the SEC’s action.

We’ve blogged about these rule changes several times, and they’re not insignificant. Check out this blog for more on the new AS 1000, this blog for the implications of the amendment to Rule 3502, and this blog for information on the amendments to AS 1105 & AS 2301.

– John Jenkins