backOn June 6, 2023, the PCAOB proposed, and solicited public comment on, a set of revised audit standards addressing an auditor’s responsibility for considering a company’s noncompliance with laws and regulations, including fraud. The proposed revised standards would require auditors to proactively identify laws and regulations that, if violated, could have a material effect on the client’s financial statements (whether direct or indirect), would strengthen the requirements for auditors to evaluate whether noncompliance has occurred, and would impose specific obligations on auditors to communicate noncompliance to management. In a press release, the PCAOB said the goals of the proposed amendments are to “encourage companies to take more timely remedial actions and thereby reduce investor harm caused by legal and regulatory penalties” and “to lower the likelihood that financial statements are materially misstated due to noncompliance with laws and regulations.” Public comments on the proposal are due by August 7, 2023.
The PCAOB’s proposal is available here. The accompanying press release is available here.