
Bloomberg Tax reported that US auditors are trying to assess a series of rule changes in the next couple of years that will impose stricter requirements for examining the books of some of the biggest companies worldwide.
The new requirements originate from a wave of standard-setting activity by the Public Company Accounting Oversight Board (PCAOB), which has produced six final projects since 2022 in the board’s drive to revamp an outdated rule book while curbing increasing audit flaws found in routine inspections.
The six final rules the auditors must follow include those on contributory liability and quality control, among others. There are five more ongoing projects, including a controversial proposal that would require auditors to investigate more thoroughly for crimes that could sink stock values.
However, this quick churn under Chair Erica Williams's reign has caused strain among auditors and corporate advocates who question if these reforms will really result in stricter corporate accounting checks.
According to Bloomberg Tax, auditors have asked for more time to shape the reforms and understand how the proposals interplay with the other requirements. The US Chamber of Commerce has stated that by being in a rush, the board could come up with rules that are not well constructed.
Ex-PCAOB economic research fellow Colleen Boland said, “They’re moving so many dials, they don’t know which dial is going to impact what. The PCAOB doesn’t know; the firms don’t know; the investors don’t know.”
Despite the confusion, Williams has been resistant to putting a break on the blitz of changes. Previously, she told Bloomberg Tax that the PCAOB depended on years of research and feedback to draft reforms.
The PCAOB said in a statement that refreshing the agency’s requirements should lead to more “consistent and effective practices for auditors, leading to better audit quality."
To date, Bloomberg Tax reported that most of PCAOB’s work has involved inspecting auditors’ work to ensure it meets basic standards and levying sanctions when violations happen. Previous standard-setting has dealt with reforms, such as risk assessments and expanding auditor communications.
The latest updates are meant to tackle recurring problems found in routine inspections, with requirements that support firm culture and governance that lead to more meticulous auditing, according to Benjamin Schiffrin, director of securities policy at consumer advocacy group Better Markets.
Inspection violations have increased at a solid pace in the years since the start of COVID. In 2023, the PCAOB found flaws in almost half of all audits it inspected, Bloomberg Tax reports.
Among recently finished projects, Williams and other board members believe the new quality controls standard approved by the Securities and Exchange Commission on Sept. 9 will raise the bar for corporate audits. The board revamped foundational rules for how companies manage their practices, including ethics and staffing individual audits, to deal with risks they face in their routine practice.
Companies must establish independent oversight of internal safeguards under the new standard, which is effective Dec. 2025.
Even as the PCAOB raises the bar for audits, it has imposed a lower threshold for holding individual partners accountable for their role in failed audits.
Thomas White, a lecturer at Columbia Law School, said that the liability shift does not change the fundamentals of auditing but demonstrates the PCAOB’s tougher stance on enforcement.