Statement in Support of the New Standard on the General Responsibilities of the Auditor

Auditing Standard 1000 (“AS 1000”) is an important step forward for investors and all users of financial statements. The standard reaffirms the auditor’s duty to protect investors; to act with due professional care, skepticism, and judgment; and to perform the audit to obtain reasonable assurance that the financial statements and internal controls over financial reporting are sound.[1]

A high-quality audit is the foundation upon which investor trust and flows of capital are built. And the requirements of AS 1000 form the building blocks of that foundation. The U.S. capital markets are often the best option for everyday investors seeking a place for their hard-earned dollars to grow into a down payment for a home, college tuition, or a secure retirement. But the system that makes up our markets is inherently complex. Investors must navigate an intricate web of actors with varying incentives, layers of specialization, and a host of technical functions. When evaluating issuances of securities and the financial statements that underlie their value, investors must rely upon specialists like auditors. In order to ensure that their trust in and expectations of auditors, and actors like them, is not misplaced, it is necessary to have a meaningful baseline of professional standards that carry consequences for failing to meet them. These are the standards that AS 1000 requires.

Further, in proposing and adopting AS 1000, the PCAOB is exercising its crucial role as an independent regulator of the auditing profession. AS 1000 replaces a group of standards that were adopted wholesale from the standards written by the profession itself decades ago through the American Institute of Certified Public Accountants (“AICPA”). In that initial release, the PCAOB noted that the AICPA standards were adopted on a “transitional basis” to ensure continuity, and the PCAOB would establish “a schedule and procedure for the review of all Interim Professional Auditing Standards” to determine whether those interim standards would be appropriate as permanent PCAOB standards.[2] That was over 21 years ago. Until recently, the vast majority of relevant interim standards remained in substantially the same form in which they were adopted and many were decades old.[3] I applaud this PCAOB for its leadership and for fulfilling its role as an independent auditing standard setter and regulator of the audit profession.

The PCAOB is living up to its obligations to protect investors and further the public interest in the preparation of informative, accurate, and independent audit reports so that there is a foundation upon which investor confidence and trust can be anchored. Thank you to the hardworking staff of the Office of the Chief Accountant at the SEC as well as the members of the PCAOB and its staff.