PCAOB : 5 Good Practices for Auditor Independence
In a recent staff report , the Public Company Accounting Oversight Board ( PCAOB ) provided some advice to accounting firms on auditor independence compliance , after the audit regulator saw a year-over-year increase in the number of comment forms related to independence problems during inspections of firms ’ audits of issuers from 2021 to 2023 .
The following five good practices related to independence and help audit firms comply with PCAOB and SEC rules and standards have been observed by PCAOB inspectors :
1 . Increasing the use of technologybased tools : Tech-based tools can help promote early detection of potential personal independence violations . 2 . Enhancing the frequency of personal independence representations : Certain audit firms have increased the frequency for personnel to provide independence compliance representations to a quarterly or semiannual basis . Also , to enhance the process , certain audit firms have tailored the representations based on personnel ’ s financial interests and / or services provided to audit clients .
3 . Enhanced processes : These include mandatory meetings with firm personnel skilled in independence matters to guide them through their financial holding disclosures , and those of close family members , to ensure proper considerations are given to reporting all financial holdings .
4 . Establishing disciplinary actions : Specific policies and procedures providing sanctions for personal independence policy violations include , but not limited to , failure to timely complete semi-annual or quarterly personal independence representations . The procedures include audit firms assessing the severity , frequency and nature of personal independence policy violations , and determining disciplinary actions commensurate with the violations .
5 . Use of templates : Using a global template with standardized language for all audit engagement letters for clients subject to SEC and PCAOB independence standards and rules has helped prevent the inclusion of indemnification clauses , contingent fees and other prohibited fees or services in the engagement letters of “ other auditors .”
Read more at https :// assets . pcaobus . org / pcaob-dev / docs / default-source / documents / auditor-independencespotlight . pdf ? sfvrsn = 7fddcf7b _ 2 .
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