In our letter to the PCAOB’s invitation to comment on the proposed Amendments to PCAOB Auditing Standards related to a Company’s Noncompliance with Laws and Regulations and Other Related Amendments, we commend the Board for reopening the comment period and hosting the virtual roundtable on March 6, 2024 to solicit additional feedback on the proposal. The roundtable was a useful next step in the Board’s outreach efforts to inform the further development of a balanced and operational auditing standard related to a company’s noncompliance with laws and regulations (NOCLAR), along with clear implementation and application guidance for auditors.
We believe the roundtable starkly illustrated the wide-ranging interpretations of the proposal as drafted—which may not align with the Board’s intentions and expectations—as well as a general misunderstanding of the auditor’s current responsibilities and actions regarding a company’s NOCLAR. These divergent views demonstrate that the proposed requirements are not sufficiently clear and may not, therefore, be in the public’s best interest.
We encourage the Board to continue to obtain stakeholder feedback and to perform further outreach that will inform revisions to the proposal. We continue to believe that auditors are able to do more than what is required today, but additional actions should not come at considerable costs to stakeholders. Further, certain roundtable participants provided specific, actionable feedback that would considerably enhance the operationality of the proposed requirements and possibly clarify the Board’s intent. In our view, reevaluating and revising the originally proposed requirements is essential to providing an auditing standard that is consistently understood and applied.
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