The Public Company Accounting Oversight Board on Jan. 30 posted a staff presentation video designed to help explain the audit firm’s risk assessment process under the PCAOB’s new quality control standard.
The board approved the updated quality control standard, QC 1000, A Firm’s System of Quality Control, last May. The new standard 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 would be required 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.
The Securities and Exchange Commission voted 3-2 to approve the quality control standard last September.
The audit firm’s risk assessment process is the basis for a risk-based approach to the design, implementation, and operation of the firm’s quality control system, the PCAOB said in a media release on Thursday.
Led by expert staff in the PCAOB’s Office of the Chief Auditor, the video covers topics including:
- Establishing quality objectives;
- Identifying and assessing quality risks;
- Designing and implementing quality responses that address quality risks; and
- Modifying the risk assessment, as needed.
The video is the latest in a series of resources the PCAOB has recently released to assist and inform firms and auditors in their implementation of PCAOB standards and rules. For more PCAOB implementation resources on QC 1000 and other PCAOB standards and rules, visit the Implementation Resources for PCAOB Standards and Rules page.
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