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December 12, 2013

PCAOB to review effects of non-audit services expansion: Doty

The Public Company Accounting Oversight Board (PCAOB) is looking into the effects of audit firms expanding by offering more non-audit services, according to PCAOB chairman James Doty’s speech at the AICPA national conference.

The news comes after what he described as a "resurgence" of firms acquiring non-audit practises in recent weeks.

This resurgence has raised questions over its possible impact on audit function and quality, and also has implications for the independence of the audit function, he said.

Doty warned that firm management will need to take steps to meet the "compensation and cultural challenges that destabilised Arthur Andersen," and will also need to avoid talent and resources being allocated away from audit. Questions were also raised over the capability of audit leadership to evaluate and manage business lines away from audit.

The PCAOB intends to use its existing staff and it’s Centre for Economic Analysis to analyse these questions, and Doty added: "We need roundtables and task force attention on the implications of the regeneration of non-audit consulting."

His words come after negotiations over further restrictions to what non-audit services firms could provide for audit clients proved a stumbling block in the EU’s recent trialogue negotiations on audit reform.

The European Parliament has argued for a ‘black list’ of services audit firms are banned from providing for clients, aligned to international standards, while the Council has pushed for a European black list which each country could add to in their own jurisdiction.

Additionally, Doty spoke about audit transparency, which the PCAOB re-proposed in early December, saying "the lack of generally available information about audit engagement partners limits audit committees’ ability to meaningfully assess and compare the partner’s qualifications and experience."

Related Article

Fears of a rushed agreement emerge as EU audit reform nears end

Related Link

Public Company Accounting Oversight Board

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