PCAOB updates tech and liability rules

Auditors will now have more clarity around using technology during audits, thanks to the PCAOB. The agency recently amended two of its rules around technology-assisted audits, adding more detail. It also tightened a rule around when auditors can be held liable for noncompliance on the part of their firms.

Greater certainty around tech: The PCAOB updated portions of standards AS 1105, Audit Evidence, and AS 2301, The Auditor’s Responses to the Risks of Material Misstatement, that deal with using “technology-assisted analysis” during audits, to:

• Evaluate the reliability of information in audit procedures, such as a company’s controls over digital data;
• Establish when and how audit evidence can be used for more than one purpose;
• And perform tests and then drill down into details—for instance, using technology to identify transactions that should be looked at in greater depth, such as all those processed by a certain individual.

The amendments are designed to “reduce the risk that auditors will issue an opinion without obtaining…reliable audit evidence,” the PCAOB said in a statement. It will also give auditors greater clarity around the agency’s expectations. Some auditors, Chair Erica Williams said during prepared remarks, weren’t using technology-assisted analysis due to perceived regulatory uncertainty.

Reckless no more: The PCAOB also amended Rule 3502, which has been in place since 2005, making it more stringent. Previously, the rule stated that auditors could be held liable when they “recklessly,” as well as “negligently, directly, and substantially” contributed to their firms’ noncompliance with rules. The PCAOB removed the word “recklessly” from the rule, bringing it into closer alignment “with the same standard of reasonable care” auditors are expected to maintain in the course of their duties, the agency stated in a press release.