November 18, 2024
PCAOB Pauses NOCLAR
Speaking of delayed rulemaking, last Friday, Accounting Today reported that the PCAOB has put NOCLAR rulemaking — which was initially slated to be finalized by year-end — on hold following the election. Here’s more from the article:
One reason for the change of plans is that the PCAOB anticipates changes in the regulatory environment under the Trump administration, especially in the Securities and Exchange Commission, which would have to approve the final standard before it could be adopted. The Trump administration is likely to replace SEC chairman Gary Gensler, who has spearheaded many of the increased regulatory efforts at the Commission and encouraged the PCAOB to update its older standards and take a tougher stance on enforcement and inspections. …
According to a person familiar with the PCAOB process, no further action is expected until further consultation with the SEC under the incoming administration can take place. … The PCAOB expects it to remain on the docket for 2025 but doesn’t want to try to jam it through this year. …
[T]he PCAOB is mindful of the difficulty of having the SEC decide on whether to approve it, especially if the five-member commission becomes evenly split among two Republican members and the two Democrats if Gensler departs or is ousted. The PCAOB feels the SEC needs adequate time to review and educate itself on the proposed standard, rather than having to jam it through a two-two commission, especially with the amount of engagement that will need to take place given such an important standard, according to a person familiar with the matter.
A PCAOB spokesperson also pointed to the issuance of staff guidance last week outlining the existing responsibilities of auditors to detect, evaluate and communicate about illegal acts. But, in terms of next steps for NOCLAR, those are TBD pending review of all comment letters, the roundtable feedback and responses to targeted inquiries from firms regarding their existing approach. It’s unclear whether the PCAOB may repropose the standard with modifications or move forward another way.
NOCLAR is one of the agenda topics our panelists plan to cover during Thursday’s webcast “Audit Quality: Lessons from BF Borgers and Other Recent Developments” focused on what corporate attorneys need to know about the latest audit-quality developments to advise their client(s) on financial reporting and corporate governance matters. Tune in at 2 pm ET to hear from Deloitte’s William Calder, Maynard Nexsen’s Bob Dow, and Nonlinear Analytics’ Olga Usvyatsky.
– Meredith Ervine