TheCorporateCounsel.net

The PCAOB recently issued its annual report on conversations with audit committee chairs.  According to the report, the topics that audit committees spent the most time discussing with their auditors include the following:

1. Factors affecting relationships with the audit firm, such as communication, coordination and technical expertise,
2. Firm inspection reports,
3. The economic environment affecting the audit,
4. Auditing and accounting, including critical audit matters (CAMs), and
5. The impact of emerging technology.

The PCAOB’s report says that the audit committee chairs of public companies audited by smaller firms spent more time discussing significant transactions, fraud risks & procedures to address those risks, and internal controls issues. In contrast, audit committee chairs of public companies audited by the Big 4 spent more time on independence and accounting issues.

One of the report’s more interesting findings is the ambivalent attitude audit committee chairs have toward the use of emerging technology in audits. While they acknowledged that emerging technologies, including AI tools, have the potential to enhance the performance of audit procedures, they also expressed concern that overreliance on technology in the audit process may cause complacency and result in auditors not exercising adequate professional judgment and skepticism.

– John Jenkins