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Earlier this month, Erica Williams was reappointed to a second term as Chair of the PCAOB. Her second term begins on October 25, 2024 and runs through October 24, 2029. It is clear that the PCAOB will continue to be active in modernizing its standards under the leadership of Chair Williams.

Recently, the PCAOB announced the adoption of amendments to two auditing standards to address the use of technology-assisted analysis. The amended standards are AS 1105, Audit Evidence, and AS 2301, The Auditor’s Responses to the Risks of Material Misstatement. The PCAOB’s announcement notes:

The changes adopted today 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 form. The adopting release emphasizes auditors’ responsibilities when evaluating the reliability of such information used as audit evidence. For example, when auditors test a company’s controls over electronic information, their testing should include, where applicable, controls over the company’s information technology general controls and automated application controls 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, auditors may use technology-assisted analysis to analyze a population of transactions as part of identifying risks of material misstatement or to perform, after identifying such risks, substantive procedures on all items within a population. The adopting release specifies that if an auditor uses an audit procedure for more than one purpose, the auditor should achieve each objective of the procedure.

– Performing tests of details: When performing tests of details, auditors may use technology-assisted analysis to identify transactions and balances that meet certain criteria and warrant further investigation. For example, auditors may identify all transactions within an account exceeding a certain amount or processed by a certain individual. The adopting release clarifies that the auditor’s investigation of such items should include determining whether the identified items individually or in the aggregate indicate misstatements or control deficiencies.

The new standard will apply to all audits conducted under PCAOB standards. Subject to approval by the SEC, the new standard and related amendments will take effect for audits of financial statements for fiscal years beginning on or after December 15, 2025.

– Dave Lynn