The Public Company Accounting Oversight Board (PCAOB) posted three new resources on Oct. 23 related to the implementation of QC 1000, A Firm’s System of Quality Control, a new standard the board approved this past May.
Before the new standard was adopted by the board, the quality control rules on the books were developed and issued by the AICPA before the PCAOB was established in 2002. Given the significant changes in the auditing environment since that time, the PCAOB made it a priority to modernize and update those rules.
The three new resources include:
- Practice aid: This practice aid provides a high-level overview of certain features unique to QC 1000, including highlighting incremental requirements that QC 1000 imposes on firms that issued audit reports for more than 100 issuers in the prior calendar year.
- Comparison document: This comparison document maps the text of QC 1000 against the requirements of the International Standard on Quality Management 1, Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements, adopted by the International Auditing and Assurance Standards Board, and the Statement on Quality Management Standards No. 1, A Firm’s System of Quality Management, adopted by the AICPA.
- Webinar: This webinar, led by expert staff in the PCAOB’s Office of the Chief Auditor, provides an overview of QC 1000 requirements and is designed to help auditors prepare for the standard’s implementation.
QC 1000 will require all PCAOB-registered accounting firms to identify their specific risks that would inhibit audit quality—like the use of technology-based auditing tools that could create new risks if they don’t work as intended or are used incorrectly—and design a quality control system that includes policies and procedures to guard against those risks.
In addition, accounting firms that audit more than 100 public companies annually will be tasked to establish an external oversight function, or EQCF, for the quality control system composed of one or more professionals who can “exercise independent judgment,” the PCAOB said in May. The EQCF’s responsibilities should include, at a minimum, evaluating the significant judgments made and the related conclusions reached by the firm when evaluating and reporting on the effectiveness of its quality control system, the board said.
In 2023, only 14 audit firms out of a total of more than 1,600 registered with the PCAOB met the 100-issuer-or-more threshold.
Firms will be required to annually evaluate their quality control system and report the results of their evaluation to the PCAOB on new Form QC, which would be certified by key firm personnel to reinforce individual accountability.
The Securities and Exchange Commission narrowly approved the PCAOB’s new quality control standard by a 3-2 vote in September.
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Tags: Accounting, Audit Standards, Auditing, PCAOB
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