8011-01P
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100276; File No. PCAOB-2024-01]
Public Company Accounting Oversight Board; Notice of Filing of Proposed Rules
on General Responsibilities of the Auditor in Conducting an Audit and
Amendments to PCAOB Standards
June 5, 2024
Pursuant to Section 107(b) of the Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley,"
or the "Act"), notice is hereby given that on May 24, 2024, the Public Company
Accounting Oversight Board (the "Board" or the "PCAOB") filed with the Securities and
Exchange Commission (the "Commission" or the "SEC") the proposed rules described in
items I and II below, which items have been prepared by the Board. The Commission is
publishing this notice to solicit comments on the proposed rules from interested persons.
I.

Board's Statement of the Terms of Substance of the Proposed Rules
On May 13, 2024, the Board adopted General Responsibilities of the Auditor in

Conducting an Audit and Amendments to PCAOB Standards ("proposed rules"). The text
of the proposed rules appears in Exhibit A to the SEC Filing Form 19b-4 and is available
on the Board's website at https://pcaobus.org/about/rules-rulemaking/rulemakingdockets/docket-049-responsibilities-auditor-conducting-audit, and at the Commission's
Public Reference Room.
II.

Board's Statement of the Purpose of, and Statutory Basis for, the Proposed

Rules
In its filing with the Commission, the Board included statements concerning the
purpose of, and basis for, the proposed rules and discussed any comments it received on
the proposed rules. The text of these statements may be examined at the places specified
in Item IV below. The Board has prepared summaries, set forth in sections A, B, and C
below, of the most significant aspects of such statements. In addition, the Board is

requesting that the Commission approve the proposed rules, pursuant to Section
103(a)(3)(C) of the Act, for application to audits of emerging growth companies
("EGCs"), as that term is defined in Section 3(a)(80) of the Securities Exchange Act of
1934 ("Exchange Act"). The Board's request is set forth in section D.
A.

Board's Statement of the Purpose of, and Statutory Basis for, the Proposed Rules
(a) Purpose
The Board adopted a new auditing standard, AS 1000, General Responsibilities of

the Auditor in Conducting an Audit ("new standard," "final standard," or "AS 1000"). The
new standard replaces a group of standards originally developed by the American
Institute of Certified Public Accountants ("AICPA") and adopted on an interim basis by
the PCAOB in 2003. That group of standards established the general principles and
responsibilities of the auditor when conducting an audit ("foundational standards"). The
general principles and responsibilities addressed by the foundational standards include
reasonable assurance, due professional care, professional skepticism, independence,
competence, and professional judgment. These principles and related responsibilities
provide a foundation for the proper performance of the audit.
Through this standard-setting project, the Board has reaffirmed the general
principles and responsibilities of the auditor so that the foundation underlying the
standards continues to be sound and appropriate for performing high-quality audits.
These principles and responsibilities, enhanced and consolidated into a single auditing
standard, together with related amendments, will modernize the auditing standards to
better address fundamental aspects of the audit and provide auditors with better direction
to protect investors and further the public interest in the preparation of informative,
accurate, and independent auditor's reports.
AS 1000 will replace four standards that set forth the general principles and
responsibilities of the auditor: AS 1001, Responsibilities and Functions of the

Independent Auditor; AS 1005, Independence; AS 1010, Training and Proficiency of the
Independent Auditor; and AS 1015, Due Professional Care in the Performance of Work.
AS 1000 combines and updates the general principles and responsibilities of these
standards to reflect developments in the auditing environment.
The Board also amended certain other standards that address responsibilities
fundamental to the conduct of an audit. These amendments clarify the engagement
partner's responsibility to exercise due professional care related to supervision and review
of the audit, accelerate the documentation completion date by reducing the maximum
period for the auditor to assemble a complete and final set of audit documentation from
45 days to 14 days, and clarify the auditor's responsibility to evaluate whether the
financial statements are "presented fairly." Finally, the Board adopted additional
amendments to conform to these changes.
After carefully considering the comments the Board received, the Board adopted
the amendments substantially as proposed, with revisions that reflect the input of
commenters.
Since the PCAOB's adoption of the foundational standards in 2003, the auditing
environment has evolved, including:
•

Changes to auditing requirements through Board-issued standards;

•

New or revised independence requirements issued by the Board; and

•

Advancements in technology that are increasing the availability of electronic
audit tools and use of audit software.

The new standard and related amendments the Board adopted will modernize
PCAOB standards to:
•

Reflect changes in the auditing environment;

•

Eliminate outdated and inconsistent language; and

•

Achieve consistency with Board-issued standards.

AS 1000 and the related amendments modernize, clarify, and streamline the
general principles and responsibilities of the auditor and provide a more logical
presentation, which should enhance the useability of the standards by making them easier
to read, understand, and apply.
The Board clarified the auditor's responsibility to evaluate whether the financial
statements are "presented fairly." The Board also clarified the engagement partner's due
professional care responsibilities by adding specificity to certain audit performance
principles set out in the standards. Finally, the accelerated documentation completion
date reflects changes in the auditing environment, including advancements in technology
that have enabled auditors to assemble a complete and final set of audit documentation in
less time than in a paper-based environment. The new documentation completion date
reduces the window of opportunity for improper alteration of audit documentation and
also enables the Board to potentially begin the inspection process sooner after completion
of an audit, which the Board believes can enhance the Board's efforts to improve audit
quality and promote investor protection, ultimately enhancing investor confidence.
The new standard and related amendments will apply to all audits conducted
under PCAOB standards.
See Exhibit 3 for additional discussion of the purpose of this project.
(b) Statutory Basis
The statutory basis for the proposed rules is Title I of the Act.
B.

Board's Statement on Burden on Competition
Not applicable. The Board's consideration of the economic impacts of the

proposed rules is discussed in section D below.
C.

Board's Statement on Comments on the Proposed Rules Received from Members,
Participants or Others

The Board initially released the proposed rules for public comment in PCAOB
Release No. 2023-001 (Mar. 28, 2023). The Board received 28 written comment letters
that were specifically submitted in response to its initial proposed rules in PCAOB
Release No. 2023-001. In addition, the Board received six comment letters relating to its
consideration of proposed amendments on quality control, which were released for public
comment on November 19, 2022, and that are relevant to the definition of "applicable
professional and legal requirements" in these proposed rules. See Exhibits 2(a)(B) and
2(a)(C). The Board has carefully considered all comments received. The Board's response
to the comments it received, and the changes made to the rules in response to the
comments received are discussed below.
BACKGROUND
In April 2003, the Board adopted, on an interim basis, the generally accepted
auditing standards of the AICPA's Auditing Standards Board ("interim standards") and
the related auditing interpretations as they existed then.1 At that time, the Board stated
that it would determine whether the interim standards "should become permanent
standards of the Board, should be repealed, or should be modified."2 Since then, the
Board has adopted a number of new auditing standards that supersede or amend portions
of the interim standards and related auditing interpretations.3 However, certain remaining
interim standards, including those that address the general principles and responsibilities
of the auditor, have continued to be in effect substantially in the form adopted.

1
See Establishment of Interim Professional Auditing Standards, PCAOB Rel. No. 2003006 (Apr. 18, 2003). The auditing interpretations were the publications entitled "Auditing Interpretations"
issued by the AICPA Auditing Standards Board, as they existed and were effective as of April 2003.
2
See PCAOB Rel. No. 2003-006.

See, e.g., AS 1201, Supervision of the Audit Engagement; AS 1215, Audit
Documentation; AS 2101, Audit Planning; AS 2810, Evaluating Audit Results, and AS 3101, The Auditor's
Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion.

Since the adoption of the interim standards, the auditing environment has evolved
in many ways, including (i) changes to auditing requirements through Board-issued
standards; (ii) new or revised independence requirements issued by the Board;4 and
(iii) advancements in technology that are increasing the availability of electronic audit
tools and the use of audit software. While these developments have generally been
reflected through amendments to some interim standards and related interpretations in
connection with the Board's standard-setting initiatives, the 2022-2026 Strategic Plan
reinforced the Board's intent "to modernize and streamline [the Board's] existing
standards and to issue new standards where necessary to meet today's needs" as part of
the PCAOB's investor protection mission.5
In connection with these initiatives,6 the Board analyzed the interim foundational
standards that address the general principles and responsibilities of the auditor in
conducting an audit. These foundational standards are:
•

AS 1001, Responsibilities and Functions of the Independent Auditor;

•

AS 1005, Independence;

•

AS 1010, Training and Proficiency of the Independent Auditor; and

•

AS 1015, Due Professional Care in the Performance of Work.7

See generally Section 3 of PCAOB rules, Auditing and Related Professional Practice
Standards, Part 5, Ethics and Independence.
See PCAOB, Strategic Plan 2022-2026, at 10, available at
https://assets.pcaobus.org/pcaob-dev/docs/defaultsource/about/administration/documents/strategic_plans/strategic-plan-2022-2026.pdf?sfvrsn=b2ec4b6a_4/.
See PCAOB's interim standards project, available at
https://pcaobus.org/oversight/standards/ standard-setting-research-projects/interim-standards.
When adopted by the Board in 2003, this group of interim standards was designated as
AU sec. 110, AU sec. 220, AU sec. 210, and AU sec. 230. In 2015, the PCAOB reorganized its auditing
standards using a topical structure and a single, integrated number system, and these interim standards were
designated as AS 1001, AS 1005, AS 1010, and AS 1015, respectively. See Reorganization of PCAOB
Auditing Standards and Related Amendments to PCAOB Standards and Rules, PCAOB Rel. No. 2015-002
(Mar. 31, 2015). The reorganization did not impose additional requirements on auditors or change
substantively the requirements of PCAOB standards.

The general principles and responsibilities addressed by the foundational
standards include reasonable assurance, due professional care, professional skepticism,
independence, competence, and professional judgment. Through this rulemaking, the
Board is reaffirming and modernizing the general principles and responsibilities of the
auditor to ensure that the foundation continues to be sound and appropriate for
performing high-quality audits.

Rulemaking History
In March 2023, the Board proposed a new, single standard to replace the
foundational standards that address the general principles and responsibilities of the
auditor in conducting an audit ("proposed standard").8 The proposal also included key
amendments to other PCAOB standards that address matters that are fundamental to the
conduct of an audit. These proposed amendments clarified the engagement partner's
responsibility to exercise due professional care related to supervision and review of the
audit, accelerated the documentation completion date by reducing the maximum period
for the auditor to assemble a complete and final set of audit documentation from 45 days
to 14 days, and clarified the auditor's responsibility to evaluate whether the financial
statements are "presented fairly."
The Board received 28 comment letters on the proposal.9 Commenters included
investor-related groups, firms, firm-related groups, academics, and others. The Board
considered all comments in developing the final standard and amendments, and specific
comments are discussed in the analysis that follows.

Proposed Auditing Standard – General Responsibilities of the Auditor in Conducting an
Audit and Proposed Amendments to PCAOB Standards, PCAOB Rel. No. 2023-001 (Mar. 28, 2023)
("proposal" or "proposing release").
The comment letters received on the proposal are available in the docket for this
rulemaking on the PCAOB's website (https://pcaobus.org/about/rules-rulemaking/rulemakingdockets/docket-049-responsibilities-auditor-conducting-audit/comment-letters).

Overview of Existing Requirements
This section discusses key provisions of the existing standards.
Key provisions of AS 1001, Responsibilities and Functions of the Independent
Auditor, include:
•

The objective of an audit of financial statements is to express an opinion on
the fairness of the financial statements in presenting, in all material respects,
the financial position, results of operations, and cash flows in accordance with
generally accepted accounting principles ("GAAP"). The auditor also
disclaims an opinion if circumstances require. (AS 1001.01)

•

The responsibilities of the auditor and management are that (i) the auditor
plans and performs the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement, whether caused by
error or fraud; and (ii) management is responsible for the financial statements,
including adopting accounting policies and establishing and maintaining
internal control to initiate, record, process, and report transactions (as well as
events and conditions) consistent with management's assertions in the
financial statements. (AS 1001.02-.03)

•

The auditor is to possess professional qualifications and exercise professional
judgment in determining which auditing procedures are necessary in the
circumstances to gain a reasonable basis for the opinion. (AS 1001.04-.05)

•

The auditor should be aware of and consider auditing interpretations
applicable to the audit and, if the guidance in the interpretations is not
followed, be prepared to explain how the auditor complied with the provisions
of the auditing standard addressed by the guidance. (AS 1001.11)

Key provisions of AS 1005, Independence, require that the auditor:

•

Maintain independence in mental attitude and be intellectually honest,
impartial, and without bias with respect to the client (i.e., be independent in
fact). (AS 1005.01-.03)

•

Be free from any obligation to or interest in the client, its management, or its
owners, so that the general public maintains confidence in the independence
of auditors. (AS 1005.03)

•

Not only be independent in fact, but also avoid situations that may lead
outsiders to doubt the auditor's independence. (AS 1005.03)

Key provisions of AS 1010, Training and Proficiency of the Independent Auditor,
require that:
•

The audit be performed by persons having adequate technical training,
proficiency, and experience as an auditor. (AS 1010.01-.02)

•

The training of the auditor be adequate to meet the requirements of the
profession, be adequate in technical scope, and include general education. (AS
1010.01-.03)

•

New audit professionals obtain professional experience through proper
supervision and review of their work by those who are more experienced, with
the nature and extent of supervision reflecting variances in practice. (AS
1010.03)

•

The engagement partner exercise seasoned judgment in the varying degrees of
supervision and review of work performed and judgments exercised by
subordinates, and subordinates meet the responsibilities of their work. (AS
1010.03)

•

The auditor continue professional training to become aware of developments
in business and the profession, and study, understand, and apply new
pronouncements on accounting and auditing. (AS 1010.04)

Key provisions of AS 1015, Due Professional Care in the Performance of Work,
require that:
•

The auditor exercise due professional care in the planning and performance of
the audit and the preparation of the report, including observance of the
auditing standards by professionals within the auditor's organization. (AS
1015.01-.02)

•

The auditor possess "the degree of skill commonly possessed" by other
auditors and exercise it with "reasonable care and diligence" (i.e., due
professional care) in the planning and performance of the audit and the
preparation of the report. (AS 1015.01 and .05)

•

The engagement team be assigned to tasks and be supervised commensurate
with their level of knowledge, skill, and ability so that they can evaluate the
audit evidence they are examining. (AS 1015.06)

•

The engagement partner know, at a minimum, the relevant professional
accounting and auditing standards, be knowledgeable of the audit client, and
be responsible for the assignment of tasks to, and supervision of, the members
of the engagement team. (AS 1015.06)

•

The auditor exercise professional skepticism throughout the audit, with a
questioning mind and a critical assessment of audit evidence, to diligently
gather and objectively evaluate audit evidence, and consider the competency
and sufficiency of the evidence, and not be satisfied with less than persuasive
evidence because of a belief that management is honest. (AS 1015.07-.09)

•

The auditor obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether caused by error or fraud,
or whether any material weaknesses exist as of the date of management's
assessment. Reasonable assurance is "a high level of assurance" but is not

absolute assurance because of the nature of audit evidence and the
characteristics of fraud. (AS 1015.10)
Key provisions of other standards relevant to this rulemaking include:
•

AS 1201.04-.05 and AS 2101.03, which describe the engagement partner's
responsibilities for supervision and review of audit documentation.

•

AS 1215.06, which requires the auditor to document procedures performed,
evidence obtained, and conclusions reached with respect to relevant financial
statement assertions.

•

AS 1215.15, which requires the auditor to complete the necessary auditing
procedures and assemble for retention a complete and final set of audit
documentation within 45 days after the report release date.

•

AS 2810.30, which requires the auditor to evaluate whether the financial
statements are presented fairly, in all material respects, in conformity with the
applicable financial reporting framework.

•

AS 2815, The Meaning of "Present Fairly in Conformity with Generally
Accepted Accounting Principles," which explains the meaning of "present
fairly" as used in the phrase "present fairly … in conformity with generally
accepted accounting principles," and the basis for the auditor's opinion on
whether the financial statements present fairly an entity's financial position,
results of operations, and cash flows in conformity with generally accepted
accounting principles.

Reasons to Improve Auditing Standards
The new standard and related amendments are intended to modernize, clarify, and
streamline the general principles and responsibilities of the auditor described in the
foundational standards. The Board identified several areas discussed below that the Board

believes will enhance the useability of the requirements by making them easier to read,
understand, and apply.
1.

Alignment with Board-issued Standards and Rules

Since the adoption of the foundational standards, the Board has issued a number
of new auditing standards and amendments. Certain of these standards address other
principles and responsibilities that are fundamental to the conduct of an audit, including
the engagement partner's supervisory and review responsibilities and general
requirements for audit documentation. Expressly incorporating these specific principles
and responsibilities for conducting an audit in the new standard and related amendments
should provide the auditor with more complete direction on matters that are central to the
auditor's work.
Certain descriptions of requirements in the foundational standards do not align
with the language used in Board-issued standards. For example, some provisions in the
foundational standards refer to GAAP;10 however, in recognition of the SEC's acceptance
of filings that include financial statements prepared under accounting frameworks other
than U.S. GAAP, such as International Financial Reporting Standards ("IFRS"), Boardissued standards are written as framework neutral and refer instead to the applicable
financial reporting framework.11 As another example, in describing professional
skepticism, AS 1015 refers to the competency and sufficiency of the audit evidence rather
than using terminology consistent with the Board-issued AS 1105, Audit Evidence, which
refers to audit evidence as sufficient and appropriate. The Board believes that aligning the

10
See, e.g., AS 1001.01 and .03.

See paragraph .01, footnote 1 of AS 2410, Related Parties ("The auditor should look to
the requirements of the U.S. Securities and Exchange Commission for the company under audit with
respect to the accounting principles applicable to that company …"); Auditing Standard No. 18 – Related
Parties Amendments to Certain PCAOB Auditing Standards Regarding Significant Unusual Transactions
and Other Amendments to PCAOB Auditing Standards, PCAOB Rel. No. 2014-002 (June 10, 2014), at A46 (describing the approach of AS 2410.01, footnote 1 as "framework neutral").

descriptions of the general principles and responsibilities in the new standard with
language used in Board-issued standards will minimize potential confusion.
The foundational standards were originally written for audits of financial
statements, but certain general principles and responsibilities described in the standards
(e.g., reasonable assurance, due professional care, and professional skepticism) apply
equally to audits of internal control over financial reporting ("ICFR"). None of the
foundational standards mention audits of ICFR or refer to AS 2201, An Audit of Internal
Control Over Financial Reporting That Is Integrated with An Audit of Financial
Statements. While AS 2201 refers to the foundational standards for the requirements
related to technical training and proficiency as an auditor, independence, and the exercise
of due professional care, including professional skepticism,12 the Board believes it is
important to clarify in the new standard that the general principles and responsibilities
apply to an audit of ICFR as well as an audit of financial statements.
The application of the general principles and responsibilities should be improved
by conforming the presentation of the related requirements to the structure used in Boardissued standards. This includes specifying an introduction and objectives to the new
standard. In addition, the responsibilities from the foundational standards should be
clarified by expressing the related requirements using terms described in PCAOB Rule
3101, Certain Terms Used in Auditing and Related Professional Practice Standards (e.g.,
using "must" and "should" to describe the degree of responsibility that the standards
impose on auditors). Much of the explanatory material from the foundational standards
that continues to be relevant has been relocated to the discussion in this release, which
should facilitate the auditor's navigation of the relevant requirements and align with the
approach taken in Board-issued standards.

See AS 2201.04.

2.

New or Revised Independence Requirements Issued by the PCAOB and
the SEC

Since the adoption of AS 1005 in 2003, the PCAOB has issued independence
rules that have imposed certain incremental independence requirements on firms, relative
to the SEC rules13 (e.g., provisions related to tax services for persons in financial
reporting oversight roles at issuer audit clients).14 These incremental independence
requirements are not expressly addressed in AS 1005, but nevertheless the auditor is
required to comply with them. Further, while AS 1005 includes a general reference to the
SEC's requirements for auditor independence, there is no reference to the specific
requirements. The Board believes it is helpful to refer explicitly in the new standard to
the requirements that govern auditor independence, including independence requirements
set out by the federal securities laws and related rules, which include an overarching
provision for the auditor to maintain independence from its client in fact and in
appearance.15
3.

Advancements in Technology Increasing the Availability of Electronic
Audit Tools and Use of Audit Software

Since the foundational standards were adopted by the PCAOB, advancements in
technology have increased the availability of electronic audit tools and use of audit
software. Auditors have largely moved away from a paper-based approach to audit
documentation in favor of using software that houses electronic workpapers and audit
programs. Use of electronic workpapers facilitates more efficient performance and

See generally PCAOB rules under Section 3. Auditing and Related Professional Practice
Standards, Part 5 – Ethics and Independence.
See PCAOB Rule 3523, Tax Services for Persons in Financial Reporting Oversight

Roles.
15
See Section 10A(g) of the Securities Exchange Act of 1934 ("the Exchange Act"), 15
U.S.C. 78j-1(g);, 17 CFR 210.2-01 (Regulation S-X Rule 2-01).

review of audit procedures and enables auditors to assemble a complete and final set of
audit documentation in less time than in a paper-based environment.
Auditors are also expanding their use of and reliance on electronic audit tools. For
example, some firms have made significant investments in internally developed tools for
use in the audit. In addition, some "off-the-shelf" applications such as data analysis
software have become available to auditors. These advancements have changed the way
that many auditors perform and document their audit procedures and retain related audit
documentation. Accordingly, the new standard and amendments reflect an accelerated
documentation completion date and related documentation requirements.
4.

Outdated and Inconsistent Language

The foundational standards include outdated and inconsistent language that is not
relevant to audits conducted under the standards of the PCAOB. For example, paragraph
.03 of AS 1001 provides that the auditor may draft the financial statements in whole or in
part based on information from management during performance of the audit. This
provision is outdated and should not be included in PCAOB auditing standards because
an auditor drafting the financial statements would violate the applicable independence
rules.16 Eliminating outdated language used in the foundational standards should remove
inconsistencies between PCAOB auditing standards and the relevant rules of the PCAOB
and the SEC. Similarly, in describing the objective of the audit, paragraph .01 of AS 1001
refers to financial position, results of operations, and cash flows. This language could be
unnecessarily limiting because the objective of the audit does not change based on the
subject matter of the audit (e.g., whether it is an audit of ICFR or the financial
statements). The new standard excludes references that are outdated or inconsistent,

See 17 CFR 210.2-01(c)(4)(i) (Regulation S-X Rule 2-01(c)(4)(i)).

which the Board believes improves the application of the requirements and provides
clearer direction to auditors in executing their responsibilities.
5.

Activities of Other Standard Setters

Since the Board's adoption of the foundational standards, both the International
Auditing and Assurance Standards Board ("IAASB") and the Auditing Standards Board
("ASB") of the AICPA have updated their analogous standards:
•

IAASB Standard – International Standard on Auditing 200, Overall
Objectives of the Independent Auditor and the Conduct of an Audit in
Accordance with International Standards on Auditing ("ISA 200") (effective
2009); and

•

ASB Standard – AU-C Section 200, Overall Objectives of the Independent
Auditor and the Conduct of an Audit in Accordance With Generally Accepted
Auditing Standards ("AU-C 200") (effective 2012).

These revisions were part of clarity projects that were designed to make the
standards easier to read, understand, and apply.17 These standards were updated to align
the terminology used throughout the standards for consistency and to enhance and update
explanatory materials.
6.

Comments on Reasons for Standard Setting and Proposed Approach

The proposal sought comment on the appropriateness of the general principles
and responsibilities of the auditor and the approach to reorganize and consolidate those
responsibilities. Commenters who responded generally agreed that the general principles
and responsibilities (i.e., reasonable assurance, due professional care, professional
skepticism, independence, competence, and professional judgment) described in the

Descriptions of the clarity projects of the IAASB and ASB are available, respectively, at
https://www.iaasb.org/projects/clarity-iaasb-standards and
https://us.aicpa.org/interestareas/frc/auditattest/improvingclarityasbstandards.

proposal are appropriate. One commenter suggested that the Board address the relevance
and reliability of audit evidence and information in conjunction with the requirements in
AS 1105, as part of the general principles and responsibilities. Some commenters
addressed the reorganization and consolidation of the four existing foundational standards
into one new standard and generally supported the proposed approach.
Commenters were generally supportive of the Board's efforts to modernize and
streamline the general principles and responsibilities of the auditor. Several commenters,
for example, agreed that the proposed standard would provide a more logical
presentation, which would enhance the useability of the standards by making them easier
to read, understand, and apply. Some commenters, including investor-related groups, also
expressed support for the proposal's focus on investor protection.
Two commenters suggested consideration of analogous standards of the IAASB
and the ASB. One commenter stated that PCAOB auditing standards should not diverge
from AICPA auditing standards, to the extent appropriate. Another commenter
recommended that the Board consider similar standards of the IAASB and the ASB and
assess whether their approach could result in higher quality audits.
The proposal also sought comment on the appropriateness of the general
principles and responsibilities of the auditor in light of the availability of electronic audit
tools and the use of audit software by both larger and smaller firms. Most commenters
did not address this question. One commenter agreed that the proposed general principles
and responsibilities of the auditor are appropriate and clear because they are necessary to
the audit regardless of electronic tools and audit software. Another commenter
recommended considering future possibilities and uses of machine learning and artificial
intelligence ("AI") technologies, which in the views of the commenter "are progressing
rapidly."

The final standard retains the general principles and responsibilities of the auditor
described in the proposal, subject to revisions described below. The final standard also
retains the overall approach of consolidating the foundational standards and the general
principles and responsibilities of the auditor under one standard. The Board did not add
specific requirements for evaluating the relevance and reliability of audit evidence, as
suggested by one commenter, because AS 1105 provides the necessary framework for
this evaluation. The final standard includes general requirements for conducting an audit,
and obtaining sufficient appropriate audit evidence is part of those general requirements.
In addition, in the final standard the Board did not add provisions specific to the
current and future use of emerging technologies. Due to the ever-evolving nature of
technology, specifying requirements for certain types of technology based on how those
tools are used today could quickly make the standard become outdated. Further, the
general principles and responsibilities addressed in the standard apply to all audits,
irrespective of the technology that may be used in performing audit procedures. The
Board continues to address emerging technologies (e.g., machine learning and AI) as part
of the staff's ongoing Data and Technology research project.18 Research from this project
may give rise to individual standard-setting projects and may also inform the scope or
nature of other projects that are included on the Board's standard-setting agenda.
With respect to comments on analogous standards issued by other standard
setters, the Board believes that AS 1000 is based on general principles and
responsibilities of the auditor, similar to the bases of analogous IAASB and AICPA
standards. The Board carefully considered the approaches of other standard setters when
developing the proposal, and the new standard and amendments being adopted reflect the
approach that the Board believes best protects investors and furthers the public interest.

18
See the PCAOB's agenda related to standard setting, research, and rulemaking projects,
available at https://pcaobus.org/oversight/standards/standard-setting-research-projects.

As a result, certain differences exist between the Board's new standard and those of other
standard setters, including a number of provisions that the Board believes are appropriate
and consistent with the Board's statutory mandate to protect the interests of investors and
further the public interest.
DISCUSSION OF FINAL RULES
A.

Overview of Final Rules
The Board replaced AS 1001, AS 1005, AS 1010, and AS 1015 with one

standard, AS 1000, that describes the general principles and responsibilities of an
auditor19 in conducting an audit in accordance with the standards of the PCAOB. Briefly,
the new standard:
•

Includes introductory language that reaffirms the auditor's fundamental
obligation to protect investors through the preparation and issuance of
informative, accurate, and independent auditor's reports;

•

Includes objectives for the auditor to conduct and communicate the results of
both an audit of a company's financial statements and an audit of a company's
ICFR and satisfy and fulfill other general principles and responsibilities
described in this standard;

•

Retains and clarifies the general principles and responsibilities that are
important for an audit, including reasonable assurance, due professional care,
professional skepticism, and professional judgment;

•

Aligns the engagement partner's supervisory responsibilities under AS 1201
with due professional care;

The term "auditor" includes both a public accounting firm registered with the PCAOB
and associated persons thereof, as defined in PCAOB Rule 1001, Definitions of Terms Employed in Rules.
For example, engagement quality reviewers ("EQRs"), by virtue of their status as associated persons, are
within the term "auditor" in AS 1000. See also paragraph .03 of AS 1220, Engagement Quality Review.

•

Retains the requirement for the auditor to be independent but expresses the
obligation more directly by referring to the PCAOB's independence criteria in
its rules and standards, and the independence criteria set out in the rules and
regulations of the SEC;

•

Describes the auditor's obligations to (i) comply with ethics requirements,
(ii) obtain and maintain competence, and (iii) prepare audit documentation;

•

Expresses the auditor's responsibilities by using the terms set forth in PCAOB
Rule 3101 (e.g., must and should) that describe the degree of responsibility
that PCAOB standards impose on auditors; and

•

Removes language that is outdated, inconsistent, and not relevant to audits
conducted under the standards of the PCAOB.

As previously noted, the Board amended other PCAOB auditing standards that
address responsibilities fundamental to the conduct of an audit to:
•

Clarify the engagement partner's existing responsibilities for supervision and
review in AS 1201, AS 1215, and AS 2101 to provide more specificity about
the engagement partner's responsibility to exercise due professional care
related to supervisory and review activities required to be performed under
existing auditor requirements;

•

Clarify the requirements for audit documentation in AS 1215 to identify who
performed the work, who reviewed the work, and the date of such review;

•

Accelerate the period in AS 1215 to assemble a complete and final set of audit
documentation for retention from 45 days to 14 days; and

•

Update and incorporate the underlying requirements of AS 2815 into AS
2810, and rescind AS 2815, while preserving the meaning of "present fairly"
and streamlining the requirements to provide a more logical presentation.

In a separate release, the Board is also adopting a new quality control standard,
QC 1000, A Firm's System of Quality Control, and a new ethics standard, EI 1000,
Integrity and Objectivity, together with other amendments to PCAOB standards, rules,
and forms.20 This release includes references to QC 1000 and EI 1000, where appropriate.
B.

AS 1000
1.

Introduction

See paragraphs .01 through .02 of the new standard.
The first paragraph of the proposed standard, under the heading "Introduction,"
described the fundamental obligation of auditors to protect investors through the
preparation and issuance of informative, accurate, and independent auditor's reports. It
noted that an audit primarily benefits investors who rely on the audit to provide objective
and independent opinions on whether the company's financial statements are presented
fairly and, if applicable, on the effectiveness of the company's ICFR. The proposed
paragraph further provided that a properly conducted audit and related auditor's report
enhance the confidence of investors and other market participants in the company's
financial statements and, if applicable, ICFR. The existing foundational standards do not
include an introduction and do not describe the auditor's fundamental responsibility to
protect investors.
Investor-related groups strongly supported the proposed standard's emphasis on
the auditor's obligation to protect investors. These commenters suggested some
clarification in the language describing the auditor's obligation for, and role in, protecting
investors, as described in the Supreme Court opinion in United States v. Arthur Young &
Co.21 Some pointed to, for example, language stating that the auditor "assumes a public

See A Firm's System of Quality Control and Other Amendments to PCAOB Standard,
Rules, and Forms, PCAOB Rel. No. 2024-005 (May 13, 2024).
United States v. Arthur Young & Co., 465 U.S. 805, 817-18 (1984).

responsibility transcending any employment relationship with the client" and that the
auditor "owes ultimate allegiance to the corporation's creditors and stockholders, as well
as the investing public."22 One of these commenters stated that without additional
clarification, the phrase "fundamental obligation" is a vague concept and open to
interpretation. Two commenters recommended including in AS 1000 a footnote from the
proposal that cites the Arthur Young opinion.
Two commenters, including an investor-related group, recommended that the
standard's reference to investors be broadened to include shareholders, debtholders, and
other financial statement users who rely on a company's financial statements, consistent
with the usage by Financial Accounting Standards Board ("FASB") and the Supreme
Court in the Arthur Young opinion. One of these commenters recommended including a
definition of "financial statement users" in the final standard. Another recommended
adding a footnote to the first sentence of paragraph .01 defining and describing the
meaning of "investors."
A number of other commenters, primarily firms, expressed concerns that the
introduction language describing the auditor's role was unclear and could be misleading.
For example, several commenters noted that the description of the auditor's role in
protecting investors could be viewed as creating a new legal obligation owed to investors.
In the view of one commenter, the proposed language implied that investor protection is
the sole responsibility of the auditor and could give investors false confidence that they
can solely rely on an auditor's report as investment advice, when in fact there are many
other factors investors should consider. Another commenter asserted that the proposed
language could create a misimpression that auditors are permitted and expected to deviate
from auditing standards when they believe such a departure would be warranted to

Id. at 817 (emphasis in original).

further investors' interests. These commenters suggested that the Board clarify the
introduction language in the final standard. Some commenters provided alternative
language for the Board's consideration. For example, two commenters suggested
replacing the phrase "properly conducted" in the last sentence of paragraph .01 with
"conducted in accordance with the standards of the PCAOB" to align with language used
in the auditor's report. One commenter suggested deleting paragraph .01 entirely.
After considering the comments received, the Board retained the proposed
approach to the introduction section, while making certain revisions in light of the
comments received.
The Board revised the first sentence of the introduction to state that the auditor
has a fundamental obligation to protect investors through the preparation and issuance of
informative, accurate, and independent auditor's reports. The Board also removed a
redundant statement from proposed paragraph .01 ("and that obligation governs the
auditor's work under the standards of the PCAOB"). This statement is unnecessary
because paragraph .02 already clarifies that AS 1000 describes the general principles and
responsibilities of the auditor in properly conducting an audit in accordance with the
standards of the PCAOB. This includes the fundamental obligation to protect investors as
described in paragraph .01.
The fundamental obligation to protect investors is interwoven in the general
principles and responsibilities that guide auditors throughout their work. Under current
law, the auditor plays a critical role in the financial reporting process. By issuing opinions
concerning whether financial statements are presented fairly, in all material respects, in
conformity with the applicable financial reporting framework, auditors serve a special
"public watchdog" function under the existing federal securities laws, requiring

"complete fidelity to the public trust."23 As "gatekeepers," auditors have a public
responsibility to serve the public interest.24 Investors rely on auditors to promote
companies' adherence to federal securities law mandates and companies' disclosure of
accurate and reliable financial information.25 "Investor confidence is bolstered by the
knowledge that public financial statements have been subjected to the rigors of
independent and objective investigation and analysis" by an auditor.26 This enhanced
confidence of investors and other financial statement users in the company's financial
statements and ICFR also plays an integral role in maintaining the public trust in the
capital markets. The introduction in the final standard underscores the auditor's obligation
under the Board's auditing standards and other applicable laws and regulations.
The Board emphasized – in response to commenters who expressed concern that
the introductory language, and specifically its use of the term "obligation," could be
interpreted to establish a new legal duty – that the introductory language does not alter
any existing regulatory or legal requirements or obligations between auditors and
investors. It does not establish a novel duty or new form of legal obligation. Rather, it
reaffirms the auditor's obligation under the existing legal framework and the important
role of the auditing profession in the capital markets.27

Arthur Young, 465 U.S. at 817-18.

In the Matter of KPMG Peat Marwick LLP, SEC Rel. No. 34-43862, at 14 & n.54 (Jan.
19, 2001); see John C. Coffee Jr., Gatekeepers: The Professions and Corporate Governance 2-3 (2006)
(describing "gatekeepers" as "repeat players who provide certification or verification services to investors,
vouching for someone else who has a greater incentive than they to deceive").
In the Matter of the Application of S.W. Hatfield, C.P.A., SEC Rel. No. 34-69930, at 33
(July 3, 2013) (reviewing PCAOB disciplinary action).
McCurdy v. SEC, 396 F.3d 1258, 1261 (D.C. Cir. 2005); see Arthur Young, 465 U.S. at

819 n.15.
See Section 101(c)(6) of Sarbanes-Oxley (authorizing PCAOB to enforce compliance
with the "Act, the rules of the Board, professional standards, and the securities laws relating to the
preparation and issuance of audit reports and the obligations and liabilities of accountants with respect
thereto, by registered public accounting firms and associated persons thereof ….") (emphasis added).

Paragraph .01 of the final standard has also been revised, as suggested by some
commenters, to state that the auditor's responsibility28 transcends the auditor's
relationship with management and the audit committee of the company under audit,
providing the foundation for an objective and independent audit. This statement expresses
a longstanding principle of public accounting.29 Paragraph .01 also states that a properly
conducted audit and the related auditor's report enhance the confidence of investors and
other financial statement users in the company's financial statements and, if applicable,
ICFR. The Board retained the phrase "properly conducted audit" to align with the
description in paragraph .02. The Board removed the sentence that states that "An audit
primarily benefits investors, who rely on the audit to provide an objective and
independent opinion on whether the company's financial statements are presented fairly
and, if applicable, on the effectiveness of the company's internal control over financial
reporting" because it is redundant and unnecessary in the context of the surrounding
statements. The Board does not believe that the language in paragraph .01 suggests that
auditors may deviate from PCAOB auditing standards to protect investors. In fact, the
language clearly establishes the fundamental duty of auditors to prepare and issue their
reports in accordance with PCAOB standards. Similarly, the Board does not interpret the
language of paragraph .01 as suggesting that investors should view auditor's reports as
the sole source of investment advice. Collectively, these provisions emphasize that
auditors play a critical role in ensuring the accuracy and transparency of a company's

28
The terms "obligation" and "responsibility" are used synonymously in this standard.

See Arthur Young, 465 U.S. at 817-818 ("By certifying the public reports that collectively
depict a corporation's financial status, the independent auditor assumes a public responsibility transcending
any employment relationship with the client. The independent public accountant performing this special
function owes ultimate allegiance to the corporation's creditors and stockholders, as well as to the investing
public.") (emphasis in original); AICPA Professional Standards, Vol. 2, Code of Professional Conduct, ET
Section 53, Article II – The Public Interest (2002) (".01 A distinguishing mark of a profession is acceptance
of its responsibility to the public. The accounting profession's public consists of clients, credit grantors,
governments, employers, investors, the business and financial community, and others who rely on the
objectivity and integrity of certified public accountants to maintain the orderly functioning of commerce.").

financial information, and that this role helps investors make well-informed decisions and
supports trust in a company's financial statements.
Finally, a new footnote to paragraph .01 clarifies that references to "investors and
other financial statement users" in AS 1000 encompass a broad spectrum of stakeholders.
This group includes not only a company's existing and potential shareholders, but also
bondholders, lenders, other creditors, and others who use the company's financial
statements.30
In addition to the revisions to paragraph .01, the Board relocated certain content,
discussed in more detail below, from proposed paragraph .15 into a new note to
paragraph .01. The note reminds auditors that their obligation to protect investors
provides important context to the auditor's work when applying the requirements of
AS 1000 and other PCAOB standards and rules (e.g., when conducting interim reviews in
accordance with AS 4105, Reviews of Interim Financial Information, or when conducting
audits of ICFR in accordance with AS 2201).
Paragraph .02 summarizes the scope and content of AS 1000. The Board did not
receive comment on this paragraph and adopted it as proposed.
2.

Objectives of the Auditor

See paragraph .03 of the new standard.
The proposed standard set forth three objectives of the auditor (a) in an audit of
financial statements, to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error or fraud, and to issue
an auditor's report that expresses an opinion about whether the financial statements, taken
as a whole, are presented fairly, in all material respects, in conformity with the applicable

See FASB, Statement of Financial Accounting Concepts No. 8, Conceptual Framework
for Financial Reporting, Chapter 1, The Objective of General Purpose Financial Reporting (Dec. 2021)
("The objective of general purpose financial reporting is to provide financial information about the
reporting entity that is useful to existing and potential investors, lenders, and other creditors in making
decisions about providing resources to the entity").

financial reporting framework; (b) in an audit of internal control over financial reporting,
to obtain reasonable assurance about whether material weaknesses exist as of the date
specified in management's assessment, and to issue an auditor's report that expresses an
opinion on the effectiveness of the company's internal control over financial reporting;
and (c) to communicate externally, as required by applicable professional and legal
requirements. Other than AS 1001,31 the existing foundational standards do not include
an objective.
The proposal defined the term "applicable professional and legal requirements" by
referring to the term's definition in proposed QC 1000.32 That proposed definition
included (i) professional standards, as defined in PCAOB Rule 1001(p)(vi); (ii) rules of
the PCAOB that are not professional standards; and (iii) to the extent related to the
obligations and responsibilities of accountants or auditors or to the conduct of
engagements, rules of the SEC, other provisions of U.S. federal securities law, and other
applicable statutory, regulatory, and other legal requirements.
Several commenters expressly supported the proposed objectives of the auditor.
Some commenters suggested ways to further clarify these objectives. For example, one
commenter suggested that the objectives be reframed as objectives of the "audit" rather
than of the "auditor." Another commenter suggested moving the requirements on the
determination of critical audit matters ("CAMs") from AS 3101.11, to the objectives of
the auditor in AS 1000 in order to highlight the importance of CAMs. One commenter
recommended that the objective related to the audit of ICFR refer to the relevant criteria
used (e.g., criteria issued by the Committee of Sponsoring Organizations of the Treadway
Commission) and clarify that it is integrated with the audit of financial statements.

See AS 1001.01.

32
See A Firm's System of Quality Control and Other Proposed Amendments to PCAOB
Standards, Rules, and Forms, PCAOB Rel. No. 2022-006 (Nov. 18, 2022).

With respect to the communication objective, one commenter stated that the
proposed objective should also refer to communications with the company. Another
commenter stated that the term "applicable legal and professional requirements" is overly
broad and may inadvertently scope in legal requirements outside of public accountancy
laws. An additional commenter suggested that AS 1000 refer instead to "PCAOB rules
and standards."
The Board adopted the objectives in the final standard substantially as proposed,
with the modifications discussed below.
The purpose of the objectives is to provide additional context for understanding
the requirements in the standard. Therefore, the Board added the objective to "satisfy and
fulfill the other general principles and responsibilities described in this standard." This
provides more explicit linkage to the general principles and responsibilities set forth in
the final standard.
The objectives refer, as proposed, to the "objectives of the auditor." Because the
standard addresses the general principles and responsibilities of the auditor in conducting
an audit, the Board believes that the objectives should be directed at the "auditor" rather
than the audit as a whole.
The determination of CAMs is an important part of the auditor's reporting
responsibilities and is encompassed under the applicable professional and legal
requirements. The auditor's responsibilities for determining and communicating CAMs
are described in AS 3101 and align with the stated objectives of that standard.33 Rather
than repeating these requirements, the Board instead added a note to paragraph .17 of the
final standard that refers to the potential inclusion of CAMs in the auditor's report.

See AS 3101.04 and .11-.17.

The suggested references to the relevant criteria used in the audit of ICFR are not
suitable for the objective section of AS 1000 and are already covered in other PCAOB
standards. The specific requirements relevant to performing an audit of ICFR are
addressed in AS 2201, which provides the appropriate context for the framework to be
used by the auditor when conducting an ICFR audit and integrating the audit of ICFR
with an audit of financial statements.
As was proposed, the final standard includes an objective to communicate
externally in accordance with applicable legal and professional requirements. The auditor
has a responsibility to make certain communications (e.g., communications about audit
results to the audit committee under AS 1301, Communications with Audit Committees),
in addition to reporting externally on the results of the audit. The reference to these
requirements in the objective is not intended to limit or preclude appropriate
communications with company personnel. For example, PCAOB auditing standards
require the auditor to conduct various inquiries of management and other company
personnel (e.g., AS 2110, Identifying and Assessing Risks of Material Misstatement, and
AS 2201), which is part of complying with applicable professional and legal
requirements.
For ease of reference, the final standard includes the definition of the term
"applicable professional and legal requirements" as:
•

Professional standards, as defined in PCAOB Rule 1001(p)(vi);

•

Rules of the PCAOB that are not professional standards; and

•

To the extent related to the obligations and responsibilities of accountants or
auditors in the conduct of engagements or in relation to the quality control
system, rules of the SEC, other provisions of U.S. federal securities law,
ethics laws and regulations, and other applicable statutory, regulatory, and
other legal requirements.

This definition is intended to capture all professional and legal requirements
specifically related to engagements under PCAOB standards of issuers and SECregistered broker-dealers, including relevant accounting, auditing, and attestation
standards, PCAOB rules, SEC rules and regulations, other provisions of federal securities
law, other relevant laws and regulations (e.g., state law and rules governing accountants),
applicable ethics law and rules, and other legal requirements related to the obligations
and responsibilities of accountants or auditors in the conduct of the firm's engagements or
in relation to the quality control system.34 It does not encompass requirements that apply
to businesses generally, such as tax laws, safety regulations, and employment law.
This definition reflects revisions made in response to comments received on
proposed QC 1000.35 The definition was expanded to explicitly mention ethics laws and
regulations.36 It was also refined to make clear that it encompasses statutory, regulatory,
and other legal requirements beyond professional standards and other PCAOB rules "[t]o
the extent related to the obligations and responsibilities of accountants or auditors in the
conduct of engagements or in relation to the quality control system." This change is
designed to limit the breadth of the definition to the relevant circumstances. The phrase
"quality control policies and procedures," used in PCAOB Rule 1001(p)(vi), is drawn

The requirements related to compliance with applicable professional and legal
requirements are meant to make clear that, in engagements subject to PCAOB auditing standards, all
applicable professional and legal requirements must be followed. The requirement does not suggest that
application of "other applicable statutory, regulatory, and other legal requirements" could supersede rules
of the SEC, other provisions of U.S. federal securities law, rules of the PCAOB that are not professional
standards, or PCAOB professional standards. On the contrary, requirements relating to "applicable
professional and legal requirements" are meant to highlight the importance of adhering to other
requirements when those requirements do not conflict with or abridge requirements of federal securities
laws, PCAOB rules, or PCAOB standards.
Two commenters supported the definition as proposed. One commenter recommended
including the profession's ethical standards explicitly. Two commenters stated the phrase "other applicable
statutory, regulatory, and other legal requirements" could be read broadly and extend beyond regulations
that directly bear on the conduct of audit engagements. Another commenter suggested amending the
definition of "professional standards" in PCAOB Rule 1001(p)(vi) to refer to "quality control standards"
rather than "quality control policy and procedures."
36
These include those arising under state law or the law of other jurisdictions (e.g.,
obligations regarding client confidentiality).

from Section 110(5) of Sarbanes-Oxley, and therefore no amendment to the PCAOB rule
was necessary.
3.

Professional Qualifications of the Auditor

i.

Independence

See paragraphs .04 through .05 of the new standard.
The Board proposed to carry forward the existing requirement in AS 1005 for the
auditor to be independent, and to align the language that describes auditor independence
obligations with language used in PCAOB Rule 3520, Auditor Independence, and SEC
Rule 2-01.37 Specifically, the Board proposed to require the auditor to be independent of
its audit client both in fact and in appearance throughout the audit and professional
engagement period.38 The proposed standard also clarified that the auditor is not
independent with respect to an audit client if the auditor is not, or a reasonable investor
with knowledge of all relevant facts and circumstances would conclude that the auditor is
not, capable of exercising objective and impartial judgment on all matters encompassed
within the engagement. This clarification aligned the standard with language used in SEC
Rule 2-01(b)39 to explain further the meaning of being independent both in fact and in
appearance. In addition, the Board proposed to require the auditor to satisfy the
independence criteria set out in the rules and standards of the PCAOB, and satisfy all
other independence criteria applicable to the engagement, including the independence
criteria set out in the rules and regulations of the SEC under the federal securities laws.

17 CFR 210.2-01 (Regulation S-X Rule 2-01).

See PCAOB Rule 3501, Definitions of Terms Employed in Section 3, Part 5 of the Rules,
for the definition of the term "audit and professional engagement period."
Under the general standard in SEC Rule 2-01(b), the SEC "will not recognize an
accountant as independent, with respect to an audit client, if the accountant is not, or a reasonable investor
with knowledge of all relevant facts and circumstances would conclude that the accountant is not, capable
of exercising objective and impartial judgment on all issues encompassed within the accountant's
engagement."

Several commenters expressed support for including in AS 1000 the existing
requirements from AS 1005 and stating more directly the auditor's obligation to comply
with the independence requirements of the PCAOB and SEC. Two commenters,
including an investor-related group, suggested that the Board replace references to "audit
client" with "company under audit." One commenter asserted that using "client" does not
recognize that the auditor's public responsibility transcends the employment relationship
with the client. Another commenter asserted that the use of "client" mischaracterizes the
relationship between auditor and the company or its management, and places the auditor
in a "subservient" position. In addition, one commenter suggested adding to the final
standard additional language from SEC Rule 2-01(b) to indicate that the PCAOB and
SEC will consider "all relevant facts and circumstances" in determining independence.
That commenter also suggested limiting the use of the term "independent" in the title of
the auditor's report to only those auditors that have complied with the SEC and PCAOB
rules.
After considering the comments received, the Board adopted the requirements
related to independence substantially as proposed with some modifications. The Board
agrees with the commenters' observation that language used in the Board's standards can
help emphasize that audits are performed primarily for the benefit of investors, not
management of the company. Accordingly, the Board replaced references to "audit
client" with "company under audit" and added a footnote to clarify that the phrase
"company under audit" has the same meaning as "audit client" as defined by PCAOB
Rule 3501(a)(iv).
The Board did not add to the final standard additional language from SEC Rule 201(b) stating that the PCAOB and SEC will consider "all relevant facts and
circumstances" in determining independence. The Board's standards do not address the
SEC's processes, and need not repeat in this standard that relevant matters are considered

in PCAOB independence determinations.40 The Board also did not add limitations on the
use of the term "independent" in the title of the auditor's report. AS 3101 contains
requirements regarding the content of the auditor's report, including the title "Report of
Independent Registered Public Accounting Firm." AS 3101 also requires that the
auditor's report include a statement that the auditor is required to be independent with
respect to the company in accordance with U.S. federal securities laws and the applicable
rules and regulations of the SEC and PCAOB. Imposing any limitations on the use of the
term "independent" in the title, as suggested by a commenter, is outside of the scope of
this standard.
ii.

Ethics

See paragraph .06 of the new standard.
The Board proposed to require the auditor to comply with applicable ethics
requirements, including the rules and standards of the PCAOB. Under the proposed
standard, ethics requirements included the rules in Section 3, Part 5 of PCAOB rules and
proposed EI 1000, Integrity and Objectivity, of the QC proposal. The existing
foundational standards do not reference the auditor's responsibility to comply with ethics
requirements.
A few commenters suggested revisions to the proposed requirement. Two
commenters, including an investor-related group, stated that the proposed requirement is
weak because it focused on merely complying with rules and standards of the Board. The
investor-related group also suggested adding language that discusses subordination of
judgment to others, specifically those outside the audit firm (e.g., external specialists).

See Note to paragraph (b) of PCAOB Rule 3525, Audit Committee Pre-approval of Nonaudit Services Related to Internal Control Over Financial Reporting ("Independence requirements provide
that an auditor is not independent of his or her audit client if the auditor is not, or a reasonable investor with
knowledge of all relevant facts and circumstances would conclude that the auditor is not, capable of
exercising objective and impartial judgment on all issues encompassed within the accountant's
engagement.") (emphasis added).

The other commenter recommended requiring that firms create and maintain codes of
ethics embracing the principles of proposed EI 1000 and upholding the integrity of
capital markets and auditors' fundamental obligations to investors. An additional
commenter suggested addressing in the standard broader ethical principles, such as
integrity and objectivity, in addition to compliance with rules and standards.
After considering the comments received, the Board retained the requirement to
comply with ethics requirements substantially as proposed, with the modifications
discussed below. The Board added the word "ethics" before "rules and standards of the
PCAOB" to provide a clearer indication of the rules and standards referenced. Under the
final standard, applicable ethics requirements are not limited to the ethics rules and
standards of the PCAOB but also include state law and the laws of other jurisdictions that
may establish additional ethics provisions with which the auditor is required to comply
(e.g., obligations regarding conflicts of interest).
The Board agrees with the underlying point of the comment that auditors should
not subordinate their judgment to individuals outside the audit firm (e.g., external
specialists) and believe that the new standard will achieve the desired objective of the
comment. A subordination or relinquishment of professional judgment would be
inconsistent with the requirements of AS 1000.09-.10 related to due professional care,
which are discussed below. In addition, EI 1000 addresses the broader ethical principles
of integrity and objectivity. Specifically, the overarching requirements in EI 1000 include
(i) maintaining integrity, which includes being honest and candid, not knowingly or
recklessly misrepresenting facts, and not subordinating judgment; and (ii) maintaining
objectivity, which includes being impartial, intellectually honest, and free of conflicts of
interest. The intent of the requirement to comply with ethics in AS 1000 is to remind
auditors of their responsibilities described in EI 1000 and Section 3, Part 5 of PCAOB
rules. Therefore, additional discussion of broader ethical principles and responsibilities is

appropriately addressed in EI 1000 and need not be duplicated in AS 1000. The Board
expanded the reference to EI 1000 in footnote 6 of paragraph .06 of AS 1000 to clarify
that EI 1000 specifically requires auditors to maintain integrity and objectivity. Further
clarification on matters related to subordination of professional judgment is unnecessary
in this release. Lastly, the Board considered comments related to firms' adoption of an
ethics code as part of the adoption of EI 1000.
iii.

Competence

See paragraphs .07 and .08 of the new standard.
a.

Description of competence

The Board proposed to require that the audit be performed by an auditor who has
competence to conduct an audit in accordance with applicable professional and legal
requirements. Competence, as described in the proposed standard, consists of having the
knowledge, skill, and ability that enable an auditor to perform the assigned activities in
accordance with applicable professional and legal requirements and the firm's policies
and procedures. In the proposing release, the Board explained that the auditor's
knowledge and skill relate to adequate technical training and proficiency as an auditor,
and the auditor's ability relates to the capabilities to perform, and in the case of
supervisory staff, to review assigned tasks. The proposed standard also provided that, in
determining the appropriate level of competence, the measure is qualitative rather than
quantitative because quantitative measurement may not accurately reflect the experience
gained over time. A note to the proposed requirement stated that competence includes
knowledge and expertise in accounting and auditing standards and in SEC rules and
regulations relevant to the company being audited and to the related industry or industries
in which it operates. The proposed requirement was consistent with the auditor's existing
responsibilities under AS 1010 for maintaining "adequate technical training and
proficiency" but used updated terminology.

Several commenters sought greater clarity in the proposed requirement, stating
that it did not account for the collective competence of the engagement team or that it
might imply that all individual members of an engagement team are expected to have the
same level of competence. These commenters generally suggested (i) revising the
requirement to apply to, for example, "the engagement team, including specialists" or
"auditors, collectively" instead of "an auditor" and (ii) clarifying that necessary
competence is commensurate with the assigned tasks of the individual auditor. One
commenter suggested (i) defining the individuals intended to be covered by the
requirement, including subject matter experts and EQRs; (ii) explaining that the
competence of individuals varies based on a variety of factors; and (iii) including
quantitative factors in the measure of competence. Another commenter noted that the
proposed requirement could be interpreted to limit the ability to assign challenging work
to junior staff because they may lack significant experience.
Some commenters, mostly firms and professional organizations, also expressed
concern with the description of competence in the note to the proposed requirement –
which referred to having "expertise" in SEC rules and regulations and the relevant
industry of the company being audited – and asked for additional clarification. These
commenters asserted that the term "expertise" may impose a higher standard of
competence than intended and could imply that the expected level of knowledge is that of
a person qualified to engage in the practice of another profession or occupation (e.g., the
legal profession). One of these commenters also expressed concern with the implication
that a partner without relevant expertise in the industry in which the issuer operates may
not be competent to perform an audit of the issuer, even with the assistance of other firm
or engagement team members with relevant industry expertise. Several commenters
recommended deleting the reference to "expertise" or using alternative language such as
"proficiency" or "sufficient knowledge."

After considering the comments received, the Board adopted the requirement
related to competence substantially as proposed, with the modifications discussed below.
First, consistent with the Board's description in the proposal, the Board continues
to believe the level of competence needed to conduct the audit is driven by the activities
assigned to the individual auditors performing those activities. As the assigned activities
in an audit vary from individual to individual, so does the required level of competence to
complete those activities in accordance with applicable professional and legal
requirements and the firm's policies and procedures. For example, a first-year auditor is
not expected to have the same level of competence as a more experienced auditor because
the tasks assigned to the seasoned auditor generally require experience gained over time.
Further, PCAOB standards and rules use the term "auditor" to mean both a firm
registered with the PCAOB and its associated persons.41 Therefore, the Board believes
that defining the individuals covered by the requirement or revising terminology to
"auditors" or "engagement team," as suggested by some commenters, is not necessary.
The requirements regarding the appropriate assignment of responsibilities to engagement
team members and proper supervision are addressed in other PCAOB standards.42
Second, the Board agrees that quantitative measures are not wholly irrelevant
when measuring competence. Quantitative measures alone may not accurately reflect the
nature of experience gained over time and therefore competence should not be measured
exclusively on a quantitative basis.43 In consideration of comments, the final requirement
clarifies that competence is measured both qualitatively and quantitatively.
Third, the intent of the proposed requirement's note (providing that competence
"includes knowledge and expertise" in certain areas) was to provide additional direction
See PCAOB Rule 1001(a)(xii).

See, e.g., paragraph .05 of AS 2301, The Auditor's Responses to the Risks of Material
Misstatement, and AS 1201.05.
The description of competence is consistent with the description in QC 1000.

to auditors on the meaning of competence in the context of the company being audited.
The Board did not intend to impose a higher standard of competence beyond having the
knowledge, skill, and ability to enable the auditor to perform the assigned activities in
accordance with applicable professional and legal requirements. The Board therefore
changed "expertise" to "proficiency" in the final requirement in response to comments.
Nevertheless, the Board continues to believe that understanding the company's business
and being proficient in the rules and regulations relevant to the company under audit and
its related industry is an important part of competence. For example, an engagement
partner with significant experience mostly in auditing manufacturing companies may not
necessarily have the appropriate level of competence to oversee, and have primary
responsibility for, an audit of a financial institution.
b.

Developing and maintaining competence

The Board also proposed to require that the auditor develop and maintain
competence through an appropriate combination of academic education; professional
experience in accounting and auditing with proper supervision; and training, including
accounting, auditing, independence, ethics, and other relevant continuing professional
education. Existing AS 1010 includes a similar requirement.
Investor-related groups advocated for the inclusion of investor-related training
that focuses on investors as the primary beneficiaries of the audit and being responsive to
investors' needs. These commenters also emphasized the importance of including the
auditor's understanding of the business and industry related to the company under audit as
part of developing competence. One investor-related group suggested specific training on
materiality.
The Board retained the requirement to develop and maintain competence as
proposed. The Board agrees with investor-related groups' views on the importance of
protecting investors when conducting an audit. In that regard, paragraph .01 of the final

standard and the Board's related discussion provide the context of investor protection that
is relevant to the auditor's compliance with the requirements for developing and
maintaining competence. Further, in considering commenters' suggestion about investorfocused training, the Board believes that the implementation of the final standard will
necessarily involve training auditors on the application of the relevant requirements,
including conducting an audit with investor protection in mind.
The note to paragraph .07 of the final standard reinforces the need for auditors to
have knowledge and proficiency in the requirements relevant to the company being
audited and the related industry. Further, the auditor's responsibilities for understanding
the company's business and consideration of materiality in planning and performing an
audit are specifically addressed in other PCAOB auditing standards,44 and the Board
expects that these responsibilities would already be included in training on auditing
standards.
4.

Due Professional Care, Including Professional Skepticism

i.

Due professional care

See paragraphs .09 through .10 of the new standard.
The Board proposed to require the auditor to exercise due professional care in all
matters related to the audit. The proposed standard stated that due professional care
(i) concerns what the auditor does and how well the auditor does it, and (ii) means acting
with reasonable care and diligence, exercising professional skepticism, acting with
integrity, and complying with applicable professional and legal requirements. The
proposed requirement was based on the existing requirement in AS 1015 to exercise due
professional care.

Audit.

See AS 2110 and AS 2105, Consideration of Materiality in Planning and Performing an

The proposing release explained that exercising due professional care "in all
matters related to the audit" would encompass all aspects of planning and performing an
audit, including client acceptance and continuance procedures, and would extend to
periods after the issuance of the auditor's report, such as completion of audit
documentation,45 reporting on Form AP, Auditor Reporting of Certain Audit
Participants,46 and procedures performed in connection with filings under the federal
securities statutes.47 The Board also proposed to retain language from existing standards
related to an auditor's use of the work of other auditors, which emphasized that other
auditors are responsible for performing their work with due professional care.48
Some commenters acknowledged that due professional care is an important
principle that should be retained in the final standard. Several commenters expressed
support for requiring auditors to exercise due professional care "in all matters related to
the audit."
Some commenters, primarily some firms, advocated for retaining certain
contextual language from AS 1015.03-.04, including, for example, the description of due
professional care in the 1932 legal treatise, Cooley on Torts.49 These commenters
expressed concern that without such language there may be a lack of transparency, or

See AS 1215.15 (as proposed to be amended).

See PCAOB Rule 3211, Auditor Reporting of Certain Audit Participants.

See AS 4101, Responsibilities Regarding Filings Under Federal Securities Statutes,
which describes the auditor's responsibilities when the auditor's report is included in filings under federal
securities statutes.
See Planning and Supervision of Audits Involving Other Auditors and Dividing
Responsibility for the Audit with Another Accounting Firm, PCAOB Rel. No. 2022-002 (June 21, 2022)
(amendments approved by the SEC in Rel. No. 34-95488 (Aug. 12, 2022)), which amended AS 1015 to add
this provision.
The treatise states, among other things, that "no man, whether skilled or unskilled,
undertakes that the task he assumes shall be performed successfully, and without fault or error; he
undertakes for good faith and integrity, but not for infallibility, and he is liable to his employer for
negligence, bad faith, or dishonesty, but not for losses consequent upon pure errors of judgment."

confusion among investors and other stakeholders, about the limitations of due
professional care.
After considering comments, the Board adopted the requirement to exercise due
professional care as proposed. The Board continues to believe that the description of due
professional care in the final standard is consistent with the description in AS 1015.03
(and the reference in the current standard to the legal treatise, Cooley on Torts), which
uses the terms "reasonable care and diligence" and "good faith and integrity but not
infallibility" to describe due care. As discussed in the proposal, the Board retained
explicit reference to "reasonable care and diligence," which the Board believes is well
understood. The Board also believes that "good faith and integrity" means acting with
"integrity." The Board's use of the term "integrity" aligns with its meaning established in
EI 1000, which the Board adopted in connection with the Quality Control rulemaking.
EI 1000 codifies the concepts of integrity and objectivity, emphasizing that integrity
includes being honest and candid, not knowingly or recklessly misrepresenting facts, and
not subordinating judgment.50 The Board believes that the terms used to describe due
professional care are clear and should not cause confusion, as suggested by some
commenters, because the Board did not change the meaning of due professional care.
The proposed standard specified that, for engagement partners, due professional
care also includes (i) appropriately assigning responsibilities to, and supervising,
engagement team members; (ii) determining that the audit is properly planned and
performed to obtain reasonable assurance; (iii) evaluating that significant findings or
issues are appropriately addressed; (iv) determining that significant judgments and
conclusions on which the auditor's report is based are appropriate and supported by

See also PCAOB Rel. No. 2024-005.

sufficient appropriate audit evidence; and (v) determining that required communications
under applicable professional and legal requirements have been made.
The proposed clarifications of the engagement partner's responsibilities leveraged
existing requirements for planning and performing an audit and for completing the
corresponding audit documentation. For example, AS 1215 describes matters that are
considered to be significant findings or issues in an audit and requires the auditor to
document the significant findings or issues, including the actions taken to address them.51
As part of the engagement partner's supervisory responsibilities under AS 1201, the
proposal stated that the engagement partner would need to evaluate (in a timely manner)
the significant findings and issues identified by the engagement team to ensure
appropriate action was taken.52
Similarly, the proposal stated that significant judgments made by the engagement
team, which AS 1220 specifically requires the EQR to review, also warrant the
engagement partner's review. Because the engagement partner has primary responsibility
for the engagement, they have primary responsibility for the significant judgments made
during the engagement, notwithstanding any involvement in or responsibility for those
judgments by firm personnel outside of the engagement team, such as members of the
firm's national office. Accordingly, the "significant judgments made by the engagement
team" include all of the significant judgments made during the engagement.53 The
proposed standard aligned the engagement partner's supervisory and review activities
with existing auditor responsibilities.
A few commenters addressed the proposed requirement regarding the engagement
partner's responsibilities for exercising due professional care. One commenter
See AS 1215.12.

See AS 1201.05.

53
See Auditing Standard No.7 – Engagement Quality Review and Conforming Amendment
to the Board's Interim Quality Controls Standards, PCAOB Rel. No. 2009-004 (July 28, 2009), at 4 n.7.

recommended separating the partner's responsibilities from the broader requirement to
exercise due professional care. Another commenter expressed concern that, as presented,
the responsibilities of the engagement partner could be viewed as a substitute for the
broader responsibilities applicable to all auditors. This commenter suggested emphasizing
in the final standard that for engagement partners, the responsibilities are in addition to
those required for all auditors.
Several commenters also suggested clarifications to the proposed requirements.
For example, one commenter suggested that the requirements be extended to team
members performing supervisory activities. Another commenter pointed to potential
inconsistencies with requirements of AS 1201 and AS 2101, noting that AS 1201 does
not explicitly require the partner to assign activities to team members that adequately
match their levels of competence and allows the partner to seek assistance from
appropriate engagement team members in fulfilling responsibilities. One commenter
recommended adding a footnote to AS 1220 to the discussion of significant judgments
and conclusions.
In response to commenters, the Board relocated the proposed engagement
partner's responsibility for due professional care into a separate paragraph in the final
standard, with certain clarifications. Specifically, the Board agrees with commenters'
views that the engagement partner is not required to directly assign responsibilities to all
engagement team members (e.g., audit staff at other accounting firms involved in the
audit). Nevertheless, consistent with AS 1015.06, the engagement partner is responsible
for the appropriate assignment of tasks to, and supervision of, engagement team
members. As such, the final standard states that the engagement partner's responsibility
for due professional care includes "being responsible for the appropriate assignment of
responsibilities to, and supervision of, engagement team members." This formulation
acknowledges that in certain audit engagements, such as large, multi-tiered audits, the

engagement partner may not be directly assigning work to engagement team members.
Instead, other engagement team members performing supervisory activities may assist
the engagement partner and inform engagement team members of their responsibilities.54
The Board believes that relocating the engagement partner's responsibility for due
professional care into a separate paragraph helps draw a distinction between the
responsibilities applicable to all auditors and those that are incremental for engagement
partners. To clarify this further, the Board added "also" to the requirement in paragraph
.10 to indicate that the engagement partner responsibilities for due professional care are
in addition to those applicable to all auditors. The Board did not expand the applicability
of the engagement partner responsibilities described in AS 1000 to other members of the
engagement team performing supervisory activities because, as discussed above, the
intent of this requirement is to focus the engagement partner on exercising due
professional care as the person with the primary responsibility for the engagement and its
performance. As suggested by one commenter, the Board added a footnote to the final
standard referencing AS 1220 for the discussion of significant judgments and
conclusions. The Board adopted the remaining provisions of the requirement as proposed.
ii.

Description of professional skepticism

See paragraph .11 of the new standard.
The proposed standard stated that exercising due professional care includes
exercising professional skepticism in conducting an audit, and described professional
skepticism as an attitude that includes a questioning mind and a critical assessment of
information related to the audit. This requirement is based on the existing auditor
responsibility to exercise professional skepticism in AS 1015. The Board emphasized in
the proposal that application of professional skepticism extends beyond the information

See AS 1201.05.

used as audit evidence, which is described in AS 1105.02 as the information "that is used
by the auditor in arriving at conclusions on which the auditor's opinion is based." For
example, by exercising professional skepticism in the preparation of Form AP, the
auditor may become aware of inconsistencies in total audit hours reported by another
accounting firm participating in the audit based on the level of work assigned to that
accounting firm and take corrective action.
An investor-related group supported the proposed description of professional
skepticism to include a critical assessment of information related to the audit. In contrast,
a number of other commenters, mostly firms, expressed concern about the proposed
change in the description of professional skepticism from a critical assessment of "audit
evidence" to "information related to the audit," stating that this language is overly broad
and its meaning unclear. Some of these commenters noted that, unlike with audit
evidence, there is no established framework for auditors to assess information related to
the audit and it is unclear what such an assessment would entail. Many of these
commenters advocated for retaining the extant description of professional skepticism in
AS 1015.07, which includes "a critical assessment of audit evidence."
Some commenters offered additional explanation or suggestions, for example:
•

One commenter indicated they were unable to identify information, other than
Form AP data, that would be considered "information related to the audit" that
is not already part of "audit evidence." This commenter and another
recommended specifically incorporating Form AP data into the requirement.

•

One commenter indicated the proposed language could risk including
information related to the audit that was never presented to the auditor. This
commenter suggested retaining reference to "audit evidence" and including a
reference to information obtained to comply with rules of the Board.

•

Another commenter recommended retaining the reference to "audit evidence"
because this concept is supplemented by the requirements in proposed
paragraph .11 and by the overarching responsibility to exercise due
professional care in relation to all matters related to the audit (including the
preparation of Form AP).

Several commenters offered other views related to the description of professional
skepticism. For example, one commenter stated that the difference between "critical
assessment of information related to the audit" and "objective evaluation of evidence
obtained in an audit" in proposed paragraph .11 is unclear. This commenter suggested
combining proposed paragraphs .10 and .11 or providing further guidance, including
guidance that is aligned with other standard setters. Another commenter questioned the
assumption in the proposed standard that all auditors can exercise professional skepticism
consistently for the duration of the audit, pointing to a lack of research.
After consideration of comments, the Board revised the description of
professional skepticism. The final standard describes professional skepticism as "an
attitude that includes a questioning mind and a critical assessment of audit evidence and
other information that is obtained to comply with PCAOB standards and rules." While
the Board agrees with commenters that information related to the audit that is obtained by
the auditor is generally audit evidence, the Board continues to believe that the exercise of
professional skepticism in an audit extends beyond the evaluation of the sufficiency and
appropriateness of audit evidence. Professional skepticism is an attitude held by the
auditor throughout the audit process. For example, AS 2401, Consideration of Fraud in a
Financial Statement Audit, provides that professional skepticism requires an ongoing
questioning of whether the information and evidence obtained suggests that a material

misstatement due to fraud has occurred.55 The revised description in AS 1000 retains the
extant reference to "critical assessment of audit evidence" but also, as suggested by one
commenter, refers to information obtained by the auditor to comply with PCAOB
standards and rules, such as information to complete Form AP. The Board believes that
the revised description will provide auditors with a clear framework for exercising
professional skepticism and aligns with the auditor's obligation to exercise due
professional care, which applies to all matters related to the audit.
As suggested by one commenter, the final standard also combines in paragraph
.11 the description of professional skepticism (proposed paragraph .10) with the
description of what exercising professional skepticism entails (proposed paragraph .11)
discussed below. The Board believes this unified paragraph will provide better context
for the application of professional skepticism.
iii.

Exercise of professional skepticism

See paragraph .11 of the new standard.
The proposed standard described several factors involved in the exercise of
professional skepticism, which were largely consistent with extant requirements. Under
the proposed standard, the auditor's exercise of professional skepticism included:
•

Objective evaluation of evidence obtained in an audit (including information
that supports and corroborates management's assertions regarding the
financial statements or internal control over financial reporting and
information that contradicts such assertions), and consideration of the
sufficiency and appropriateness (i.e., relevance and reliability) of that
evidence;

See AS 2401.13.

•

Remaining alert to conditions that may indicate possible misstatement due to
error or fraud;

•

Not relying on evidence that is less than persuasive;

•

Not assuming that management is honest or dishonest; and

•

Consideration of potential bias on the part of management and the auditor.

Some commenters provided views on specific aspects of the factors involved in
the auditor's exercise of professional skepticism. The comments and related responses are
discussed in more detail below.
Objectively evaluating evidence. One commenter suggested requiring the auditor
to search for contradictory evidence. Another commenter stated that the proposed
description did not sufficiently address professional skepticism in obtaining audit
evidence and instead focused only on evaluating the evidence. One commenter stated that
the proposed description was unclear and suggested using more direct language,
including requiring the auditor to be more neutral in the assessment (e.g., evaluating
evidence that both supports assertions and evidence that does not).
The intent of paragraph .11a of AS 1000 is not to alter the responsibilities for
obtaining and evaluating evidence addressed in AS 1105, but to remind auditors of their
responsibility to exercise professional skepticism in connection with both obtaining and
evaluating audit evidence. As discussed in the proposal, sufficient appropriate audit
evidence is necessary to support the auditor's opinion. While primarily obtained from
audit procedures performed during the audit, audit evidence may also include information
obtained from other sources such as previous audits, and client acceptance or continuance
procedures. The exercise of professional skepticism is particularly important in obtaining
and evaluating audit evidence when responding to assessed risks of material
misstatement, including fraud risks.

Audit evidence consists of both information that supports and corroborates
management's assertions and information that contradicts such assertions.56 The auditor's
appropriate application of professional skepticism includes critically assessing this
information and should result in procedures that are focused on obtaining evidence that is
more relevant and reliable,57 such as evidence obtained directly by the auditor and
evidence obtained from independent, knowledgeable sources. Further, if audit evidence
obtained from one source is inconsistent with audit evidence obtained from another, the
auditor is required to perform the audit procedures necessary to resolve the matter and
should determine the effect, if any, on other aspects of the audit.58
Professional skepticism is important in all aspects of the audit, particularly in
those areas of the audit that involve significant management judgments or transactions
outside the normal course of business. It is ultimately the responsibility of each individual
auditor to appropriately apply professional skepticism throughout the audit, including
when (i) identifying and assessing risks of material misstatement, (ii) performing tests of
controls and substantive procedures, and (iii) evaluating audit results. For example, a lack
of professional skepticism in the risk assessment process could result in an auditor not
identifying or assessing risks appropriately, which could impact the effectiveness of the
audit.
Remaining alert to conditions that may indicate possible misstatement due to
fraud. The Board did not receive significant comments in this area. As part of exercising
professional skepticism, the auditor remains alert to conditions that may indicate possible
misstatement due to error or fraud. This includes, for example, being alert to information

See AS 1105.02. A new footnote has been added to AS 1000.11a, referring to AS 1105
for the discussion of management's assertions regarding the financial statements and internal control over
financial reporting, and the proposed phrase "regarding the financial statements or internal control over
financial reporting" has been deleted from paragraph .11a.
See AS 1105.07-.08.

See AS 1105.29.

that calls into question the reliability of documents and responses to inquiries the auditor
plans to use as audit evidence. Such information could identify conditions that may
indicate possible fraud or error in the financial statements. As discussed above, AS 2401
provides further requirements regarding potential fraud risk factors.
Not relying on evidence that is less than persuasive. One commenter stated that
the proposed phrase "not rely" appears to be more restrictive than the existing phrase "not
be satisfied with" in AS 1015.09 because the proposed phrase would preclude the auditor
from placing any reliance on anything less than completely persuasive evidence, even in
combination with other persuasive evidence.
The proposed phrase "not rely" was intended to convey that, consistent with
AS 1015.09, exercising professional skepticism involves seeking evidence that is more
persuasive rather than settling on evidence that may be less so. AS 1000 is not intended
to address the sufficiency and appropriateness of evidence. To avoid confusion, the final
standard retains the existing terminology from AS 1015 as "not being satisfied with
evidence that is less than persuasive." The requirements for obtaining audit evidence,
including evaluating its relevance and reliability, are discussed in AS 1105, which
provides that the quantity of audit evidence needed is affected by both the risk of material
misstatement and the quality of the evidence obtained (i.e., its relevance and reliability).
To supplement evidence that is less relevant or obtained from a less reliable source, an
auditor would need to gather additional evidence. The appropriate application of
professional skepticism focuses the auditor on seeking the best evidence reasonably
obtainable.
Not assuming that management is honest or dishonest. An investor-related group
referenced certain views expressed in the 2000 report by the Public Oversight Board's

Panel on Audit Effectiveness.59 That report recommended that auditing standards require
forensic-type fieldwork in which auditors would "modify the otherwise neutral concept of
professional skepticism and presume the possibility of dishonesty at various levels of
management, including collusion, override of internal control and falsification of
documents."60 The Board believes that establishing a presumption of management's
dishonesty would have broader implications beyond the exercise of professional
skepticism under this standard.
Consideration of potential bias on the part of management and the auditor.
Several commenters expressed concern that the obligations related to consideration of the
auditor's own bias were unclear or could be viewed as a requirement to seek contradictory
evidence. Some of these commenters noted that consideration of auditor bias is inherent
in the requirements for evaluating audit evidence under AS 1105 and suggested deleting
the reference to "and the auditor" from proposed paragraph .11e. One commenter
suggested aligning this concept with the approach used by the AICPA in their revised
audit evidence standard. Two commenters also questioned the nature and extent of
documentation necessary to demonstrate consideration of auditor bias. One investorrelated group advocated for requiring the auditor to affirmatively consider the risk of
bias, particularly confirmation bias, arising out of the financial relationship between
management and the auditor.
The Board continues to believe that it is important to include reference to auditor
bias in connection with exercising professional skepticism because certain conditions
inherent in the audit environment create incentives and pressures that could impede the
appropriate application of professional skepticism and allow unconscious bias to

See Public Oversight Board, The Panel on Audit Effectiveness Report and
Recommendations (Aug. 31, 2000).
Id. at 88-89.

influence decisions. Examples of these incentives and pressures include avoiding
significant conflicts with management, providing an unqualified audit opinion prior to the
company's filing deadline, achieving high client satisfaction ratings, keeping audit costs
low, or cross-selling other services.
As discussed in the proposal, it is important for the auditor, as part of exercising
professional skepticism, to consider the impact of management bias and the auditor's own
bias that could affect the auditor's judgments. For example, the tendency to seek
confirming information can lead the auditor to seek audit evidence that is only consistent
with management's explanations, or to favor conclusions that are consistent with the
auditor's initial beliefs or conclusions reached in prior year audits. In exercising
professional skepticism, the auditor could mitigate such potential bias by being aware of
"confirmation bias," considering alternatives provided by others, and being aware of
contradictory information.61 Auditors and management may also have biases related to
electronic information (e.g., a belief that electronic information is either always reliable
or inherently prone to error). For example, a tendency to favor output generated from
automated systems, even when contradictory information raises questions as to whether
such output is reliable, illustrates a form of bias. Exercising professional skepticism,
including critically assessing information related to the audit, helps the auditor address
the effects of potential bias on professional judgment and decision-making. It is
important to clarify, however, that the consideration of potential bias discussed above
does not change the auditor's responsibilities for evaluating contradictory evidence, as
suggested by some commenters.
Finally, the Board did not add new documentation requirements for demonstrating
the auditor's exercise of professional skepticism beyond those addressed in AS 1215.

61
For a discussion of confirmation bias, see, e.g., Raymond S. Nickerson, Confirmation
Bias: A Ubiquitous Phenomenon in Many Guises, 2 Review of General Psychology 175 (1998).

Auditors can demonstrate that their work encompassed the exercise of professional
skepticism by documenting the procedures performed and conclusions reached in
accordance with AS 1215.
After consideration of the comments, the Board adopted the provisions for
exercising professional skepticism substantially as proposed, with the modifications
discussed above.
5.

Professional Judgment

See paragraph .12 of the new standard.
Auditors exercise professional judgment throughout the audit, and existing
standards refer to the use of professional judgment, but do not describe in detail what
professional judgment means. The proposed standard provided that the auditor must
exercise professional judgment and included a description of professional judgment. As
discussed in the proposing release, auditors exercise professional judgment throughout
the audit. For example, the auditor exercises professional judgment in:
•

Determining the areas to be tested and the nature, timing, and extent of the
tests to be performed;

•

Interpreting the results of audit testing and evaluating audit evidence;

•

Evaluating the reasonableness of accounting estimates in significant accounts
and disclosures, based on information that could reasonably be expected to be
available through the date of the auditor's report;62

•

Determining if there are any CAMs in the audit of the financial statements;63
and

See AS 2501, Auditing Accounting Estimates, Including Fair Value Measurements,
which discusses the auditor's responsibility to obtain sufficient appropriate evidence to determine whether
accounting estimates in significant accounts and disclosures are properly accounted for and disclosed in the
financial statements.
See AS 3101 for requirements regarding CAMs.

•

Determining the nature and extent of documentation to comply with
documentation requirements.64

As proposed, professional judgment involved applying relevant training,
knowledge, and experience to make informed decisions and reach well-reasoned
conclusions about the courses of action that are appropriate in the circumstances such that
the audit is planned and performed, and the report or reports are issued, in accordance
with applicable professional and legal requirements.
Several commenters, primarily firms, expressed concern that the proposed
description of professional judgment could be interpreted as imposing a new strict
liability requirement. These commenters suggested removing the phrase "such that the
audit is planned and performed, and the report or reports are issued, in accordance with
applicable professional and legal requirements" in the description, noting that a
deficiency in an auditor's compliance with applicable professional and legal requirements
should not, by default, indicate a failure to exercise appropriate professional judgment. In
the view of these commenters, this implication would be contrary to the established
interpretation of an auditor's responsibilities, which recognizes that reasonable observers
may disagree regarding whether applicable standards were complied with while agreeing
that the matter in question was within the purview of the auditors' professional judgment
and could result in hindsight challenges of auditors' judgments.
One commenter recommended that the description of professional judgment refer
to "sound" judgment, consistent with the description used by the International Ethics
Standards Board for Accountants ("IESBA").65 Another commenter asked for

64
See AS 1215 for documentation requirements.

See IESBA, Handbook of the International Code of Ethics for Professional Accountants
(2023), Subsection 113 – Professional Competence and Due Care, at 113.1 A1 ("Serving clients and
employing organizations with professional competence requires the exercise of sound judgment in applying
professional knowledge and skill when undertaking professional activities.").

clarification of the concept of "well-reasoned conclusions," noting potential differences
with the definition of professional judgment established by other standard setters. Two
commenters advocated for the establishment of a judgment framework by the Board. One
commenter stated that they heard auditors express the need for more clarity about the
degree of documentation necessary to demonstrate their reasoned judgment. Another
commenter suggested adding the concept of materiality to the description of an auditor's
exercise of judgment, based on the description of judgment in AS 2815.04 with regard to
the auditor's opinion on financial statements.
The proposed phrase "such that the audit is planned and performed, and the report
or reports are issued, in accordance with applicable professional and legal requirements"
was meant to provide context to the application of professional judgment and was not
intended to introduce a strict liability requirement. After considering the comments
received, the Board removed this phrase in the final description of professional judgment.
The Board continues to believe that it is important to clarify that the use of professional
judgment does not allow for an arbitrary exercise of discretion. While conclusions could
vary, auditors are required to apply relevant training, knowledge, and experience to make
informed decisions and reach well-reasoned conclusions about the courses of action that
are appropriate in the circumstances. Therefore, the Board added a note to paragraph .12
to clarify that professional judgment is applied in the context of conducting an audit with
due professional care in accordance with applicable professional and legal requirements.
The Board believes that this note properly frames the exercise of professional judgment
without implying that a deficiency in an auditor's compliance with applicable
professional and legal requirements would by default also indicate a failure to exercise
appropriate professional judgment.
The Board did not change the description of professional judgment to include
"sound judgment" as the Board believes that term is redundant with the phrase "well-

reasoned." The phrase "well-reasoned," used in the context of an auditor exercising
professional judgment and reaching conclusions, is clear because it refers to judgment
made and conclusions reached that are based on logical thinking and an analysis of
relevant information.
As discussed earlier, the auditor is required to exercise due professional care in all
matters related to the audit. The concept of the auditor's exercise of professional
judgment is rooted in conducting the audit with due professional care. Therefore, the
Board retained the phrase "well-reasoned" as proposed. Regarding the degree of
documentation related to professional judgment, the auditor is expected to comply with
documentation requirements of AS 1215, which includes requirements for considering
the nature and extent of documentation needed.
The Board believes that creating a "framework" for how auditors should exercise
their professional judgment, as suggested by some commenters, would be beyond the
scope of this project. The Board further believes it is better for auditors to adhere to
overarching principles and standards that mandate the exercise of professional judgment
in connection with conducting an audit with due professional care. This approach
acknowledges the multifaceted nature of audits and allows auditors to exercise their
professional judgment in the unique circumstances of each audit engagement.
6.

Conducting an Audit

i.

Auditor and management responsibilities

See paragraph .13 of the new standard.
The Board proposed to require the auditor to plan and perform the audit to obtain
sufficient appropriate audit evidence to (a) obtain reasonable assurance about whether:
(1) in an audit of financial statements, the financial statements are free of material
misstatement, whether due to error or fraud, or (2) in an audit of ICFR, material
weaknesses exist as of the date specified in management's assessment; and (b) provide

the auditor with a reasonable basis for forming an opinion. This requirement was retained
from AS 1001 and AS 1015 but expanded to cover an audit of ICFR. The Board also
proposed to include a note to the requirement that clarified the distinction between the
responsibilities of the auditor and those of management, and to expand those
responsibilities to include an audit of ICFR. Specifically, the note stated that in an audit
of financial statements, the financial statements are management's responsibility and the
auditor's responsibility is to express an opinion on the financial statements. In an audit of
ICFR, management is responsible for maintaining effective ICFR and for assessing the
effectiveness of ICFR, and the auditor's responsibility is to express an opinion on the
effectiveness of the company's ICFR.
Several commenters discussed the importance of clearly distinguishing the
responsibilities of the auditor from those of management and suggested retaining the
corresponding language from AS 1001.02-.03. For example, one commenter observed
that some investors may mistakenly believe that the auditor drafts the financial
statements. In the view of this commenter, stating that management is "responsible" for
the financial statements may be interpreted as a legal responsibility and does not
explicitly convey that management prepares the financial statements.
The Board retained the requirement substantially as proposed. In response to
commenters, the Board updated the language in the note to clarify that the financial
statements, "including their preparation," are the responsibility of management and that
management is responsible for "establishing and maintaining" effective ICFR.
ii.

Reasonable assurance

See paragraph.14 of the new standard.
The Board proposed to retain the concept of reasonable assurance from AS 1015.
Specifically, the proposed standard stated that reasonable assurance is a high level of
assurance and is obtained by reducing audit risk to an appropriately low level through the

application of due professional care, including in obtaining sufficient appropriate audit
evidence.66 The auditor is able to obtain reasonable, but not absolute, assurance that (1)
misstatements are detected that, individually or in combination, would result in material
misstatement of the financial statements; and (2) in an audit of ICFR, material
weaknesses are detected.
Commenters generally supported retaining the concept of reasonable assurance
but provided views on its proposed description. A number of commenters, primarily
firms, recommended that the Board retain certain statements from AS 1015.10-.13 (or
similar language) that describe the limitations of an audit. These statements include:
•

Absolute assurance is not attainable because of the nature of audit evidence
and the characteristics of fraud. Therefore, an audit conducted in accordance
with the standards of the PCAOB may not detect a material weakness in
internal control over financial reporting or a material misstatement to the
financial statements.67

•

Even with good faith and integrity, mistakes and errors in judgment can be
made. …. [I]n the great majority of cases, the auditor has to rely on evidence
that is persuasive rather than convincing.68

•

Because of the characteristics of fraud, a properly planned and performed
audit may not detect a material misstatement.69

•

[T]he auditor is not an insurer and his or her report does not constitute a
guarantee. Therefore, the subsequent discovery that either a material
misstatement, whether from error or fraud, exists in the financial statements or

See paragraph .03 of AS 1101, Audit Risk.

See AS 1015.10.

See AS 1015.11.

See AS 1015.12.

a material weakness in internal control over financial reporting exists does
not, in and of itself, evidence (a) failure to obtain reasonable assurance,
(b) inadequate planning, performance, or judgment, (c) the absence of due
professional care, or (d) a failure to comply with the standards of the
PCAOB.70
A few of these commenters also pointed to the characterization of reasonable
assurance in the standards of other standard setters (e.g., ISA 200).71 These commenters
generally expressed concern that without such language, the proposal would reduce
transparency and contribute to the expectation gap among investors and other
stakeholders regarding the nature of reasonable assurance (as compared to absolute
assurance). For example, one commenter stated that the elimination of the existing
clarifying language could also result in ambiguity as to whether a new level of assurance
would be expected, beyond reasonable assurance but less than absolute assurance.
Some commenters offered other clarifications. For example, two commenters
suggested retaining certain language from AS 1001.02, which states that the auditor has
no responsibility to plan and perform the audit to obtain reasonable assurance that
misstatements, whether caused by errors or fraud, that are not material to the financial
statements are detected. One of these commenters also acknowledged that identifying
limitations on the auditor's responsibilities should not be the main focus of the standard.
One commenter recommended that the final standard include guidance on determining
whether audit risk is reduced to an appropriately low level, including a requirement to

70
See AS 1015.13.

Paragraph 13(m) of ISA 200 defines reasonable assurance as "in the context of an audit
of financial statements, a high, but not absolute, level of assurance." Paragraph 5 of ISA 200 further
describes that reasonable assurance "is obtained when the auditor has obtained sufficient appropriate audit
evidence to reduce audit risk (that is, the risk that the auditor expresses an inappropriate opinion when the
financial statements are materially misstated) to an acceptably low level. However, reasonable assurance is
not an absolute level of assurance, because there are inherent limitations of an audit which result in most of
the audit evidence on which the auditor draws conclusions and bases the auditor's opinion being persuasive
rather than conclusive."

consider changes in technology, the nature and quality of an issuer's financial reporting
system, relevant academic and other research, and any other factor that can reduce the
risk of material misstatements or fraud.
As discussed further below, the Board retained the description of reasonable
assurance as proposed with some modifications. The concept of "reasonable assurance" is
not new. Reasonable assurance refers to the auditor's degree of satisfaction that the
evidence obtained during the audit supports the assertions of the financial statements. It is
a high level of assurance and is obtained by reducing audit risk to an appropriately low
level (i.e., the risk that the auditor expresses an inappropriate audit opinion when the
financial statements are materially misstated or in an audit of ICFR, when a material
weakness exists) through applying due professional care, including obtaining sufficient
appropriate audit evidence.72 AS 1101 discusses audit risk and the relationships among
the various components of audit risk in an audit of financial statements. The Board
retained a reference to AS 1101 in the final standard and added the description of the
term "audit risk." The Board believes that additional guidance on consideration of audit
risk, as suggested by one commenter, is outside the scope of this standard. If additional
guidance is necessary regarding the auditor's assessment of and response to the risks of
material misstatement in an audit, it would be provided in connection with the Board's
risk assessment standards.73
The Board did not change the meaning of reasonable assurance or the requirement
to obtain reasonable assurance. In consideration of comments received, the Board
emphasized in the final requirement that reasonable assurance is not absolute assurance.
As observed by some commenters, absolute assurance is not attainable because of the

See AS 1101.03-.04.

See, e.g., AS 1101, AS 2101, AS 2105, AS 2110, and AS 2301.

nature of audit evidence (e.g., selective testing involving professional judgments74
regarding the nature, timing, and extent of procedures to be performed; and inherent
uncertainty of accounting estimates), and the characteristics of fraud (e.g., falsified
company documentation). In many cases, the auditor has to rely on evidence that is
persuasive rather than convincing. Because the Board did not change the meaning of
reasonable assurance, the Board believes that further explanation of the difference
between reasonable assurance and absolute assurance is not needed in the final standard.
The Board did not retain additional descriptions of the inherent limitations of an
audit from AS 1015.10-.13. The Board believes that these matters are part of the
differences between reasonable and absolute assurance discussed above or addressed
elsewhere in PCAOB standards. Although a properly planned and performed audit may
not detect a material misstatement because of the characteristics of fraud, that does not
diminish the auditor's responsibility to plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement,
whether due to error or fraud.
iii.

Compliance with applicable professional and legal requirements

See paragraph.15 of the new standard.
The Board proposed to require that the auditor comply with applicable
professional and legal requirements in conducting the audit. As discussed above, the term
"applicable professional and legal requirements" was proposed to have the same meaning
as defined in proposed QC 1000. Under existing provisions, auditors are required to
comply with PCAOB standards and rules. The proposed requirement emphasized that the
overall objective of the auditor is achieved by complying with more than just the
standards of the PCAOB. This includes compliance with requirements of Section 10A of

The discussion above describes requirements for exercising professional judgment.

the Exchange Act related to illegal acts, related party transactions, and an evaluation of
whether there is substantial doubt about the ability of the company to continue as a going
concern.75 The proposed requirement also stated that, in fulfilling these requirements, the
auditor should keep in mind its role in protecting investors.
One commenter on this proposed paragraph stated that the term "applicable
professional and legal requirements" appears to exceed the Board's authority, citing
Sections 104 and 105 of Sarbanes-Oxley and urged that the Board replace it with
"PCAOB rules and standards." Two other commenters noted that applicable professional
and legal requirements could be read broadly as a wide range of laws and regulations that
do not directly bear on the conduct of audit engagements. Another commenter
recommended adding clarifying language in the release to state that although the auditor
is expected to comply with applicable legal requirements, the auditor is not expected to
have the expertise of a lawyer or to express opinions on matters of law.
The Board disagrees with the commenter's assertions regarding the Board's
authority, which extends beyond PCAOB rules and standards. For example, Section
105(c)(4) of Sarbanes-Oxley empowers the Board to sanction a registered firm and its
associated persons for violations not only of PCAOB rules and standards but also
violations of "the provisions of the securities laws relating to the preparation and issuance
of audit reports and the obligations and liabilities of accountants with respect thereto,
including the rules of the Commission issued under [the] Act[.]"
As discussed above, the final standard includes a definition of the term
"applicable professional and legal requirements" rather than a reference to the definition
in QC 1000. The definition that was proposed in the QC 1000 project has been modified
in response to comments received in that rulemaking, to explicitly mention ethics laws

15 U.S.C. 78j-1.

and regulations. The definition was also refined to limit the breadth of the term, by
clarifying that it encompasses statutory, regulatory, and other legal requirements beyond
professional standards and other PCAOB rules "[t]o the extent related to the obligations
and responsibilities of accountants or auditors in the conduct of engagements or in
relation to the quality control system." The Board believes that further changes to this
term in the final standard are not necessary.
As discussed above, the Board changed "expertise" to "proficiency" in the final
description of competence in response to comments. While the Board does not expect
auditors to have the expertise of a lawyer, the Board believes that understanding the
company's business and being proficient in the rules and regulations relevant to the
company under audit and the related industry is important.
Some commenters also stated that the requirement for auditors to "keep in mind
their role in protecting investors" when fulfilling the requirement to comply with
applicable professional and legal requirements was unclear, including how to apply such
a requirement. As discussed above, investor-related groups suggested including the
language from the Arthur Young opinion to describe the auditor's responsibility. Other
commenters suggested that the proposed reference to the auditor's role in protecting
investors be deleted from the final requirement or reframed. One commenter pointed to
research noting that encouraging auditors to adopt an investor perspective when making
judgments may be detrimental to audit quality.76
After considering comments and for the reasons discussed above, the Board
retained the requirement to comply with applicable professional and legal requirements.
The Board removed the reference to "keep in mind their role in protecting investors"

This commenter cited two research papers: (i) Altiero, Kang, and Peecher (2022) "show
that auditors prompted to take an investor perspective are less likely to assess a misstatement as material"
and (ii) Dong, Wang, and Chien (2022) "highlight that taking an investor perspective can decrease assessed
risk of material misstatement." See additional discussion below.

from the final standard based on changes made to paragraph .01 of the final standard. As
discussed earlier, in connection with certain revisions made to the introductory paragraph
of the final standard, the Board added a note to paragraph .01 to remind auditors that their
obligation to protect investors is important when complying with all requirements of this
and other PCAOB standards and rules.
iv.

Relevant guidance

See paragraph.15 of the new standard.
The Board also proposed a note to paragraph .15 stating that, as part of complying
with all applicable professional and legal requirements in conducting the audit, the
auditor is required to take into account relevant guidance applicable to the audit. The
proposed requirement was an extension of the existing requirement in AS 1001.11 that
the auditor be aware of and consider auditing interpretations issued by the AICPA as of
2003, and adopted by the PCAOB and in effect. Under the proposal, relevant guidance
included PCAOB auditing interpretations, Board-issued guidance, and releases that
accompany the rules and standards of the Board.
Many commenters, mostly firms and firm-related groups, expressed concern that
the proposed note is overly broad and unclear. For example, some commenters cited a
lack of clarity as to (i) the scope of the Board-issued guidance including whether
documents such as concept releases would be covered; (ii) the timeline in which the
requirement would apply; (iii) the hierarchy of guidance and what types of guidance
would be considered authoritative; and (iv) how to reconcile potentially conflicting
information between proposing and final releases. These commenters generally suggested
either deleting the note, codifying the relevant guidance to ensure consistent application,
or specifying that relevant guidance includes releases accompanying "final" standards.
Another commenter also suggested clarifying the meaning of "take into account,"
including defining the phrase in PCAOB Rule 3101.

A few commenters, including an investor-related group, recommended including
relevant guidance within the standard rather than the accompanying release. Two
commenters suggested that the Board consider restructuring guidance in a manner similar
to the application and other explanatory material, as presented in the AICPA and IAASB
standards. An investor-related group recommended a "codification" approach that would
include placing all guidance, interpretations, releases, amendments, and rules in the same
location.
After considering comments received, the Board revised the note as follows:
•

Replaced the reference to "relevant guidance" with "PCAOB auditing
interpretations;" and

•

Replaced a footnote describing the scope of the relevant guidance with a
footnote describing the scope of PCAOB auditing interpretations.

The note in the final standard provides that, when complying with PCAOB
standards, the auditor is required to also take into account PCAOB auditing
interpretations applicable to the audit. As mentioned previously, this is an existing
requirement that is being carried forward with modifications. In the final standard,
PCAOB auditing interpretations refer to the PCAOB publications entitled "Auditing
Interpretations" as currently in effect.77 These interpretations were originally adopted by
the Board in 2003 along with the interim standards. Since that time, certain of these
auditing interpretations have been and continue to be revised or rescinded in connection
with the other amendments to PCAOB standards. The requirement in the final standard,
as it did previously, relates to the interpretations currently in effect.

PCAOB auditing interpretations do not include independence interpretations. The
requirements to comply with independence interpretations are covered by PCAOB Rule 3500T, Interim
Ethics and Independence Standards.

Apart from the PCAOB auditing interpretations referenced in paragraph .15, the
PCAOB also supports the implementation of and compliance with its standards in many
other ways, including providing guidance in rulemaking releases that accompany
standards, amendments, or rules, or issuing staff guidance.78 Although there is no
requirement to follow these guidance documents, the Board continues to believe that it is
important for auditors to pay attention to such guidance, if relevant, when conducting an
audit in accordance with PCAOB standards because it may help the auditor understand
and comply with complex provisions of those standards or rules. For example, staff
guidance can help auditors better understand how the PCAOB intends to implement,
inspect against, or enforce existing rules and standards.
The phrase "take into account" in the rule text is not new. It has been used
previously in PCAOB standards in reference to information or matters that the auditor
should think about or give attention to in performing an audit procedure or reaching a
conclusion.79 Accordingly, the results of the auditor's thinking on the relevant matters
should be reflected in the performance and documentation of the respective audit
procedure performed or conclusion reached.
Lastly, the Board did not consider the "codification" approach because it is out of
scope for this project.
v.

Audit documentation

See paragraph.16 of the new standard.
The Board proposed to require the auditor to prepare audit documentation in
accordance with AS 1215. This requirement was intended to emphasize the importance of

PCAOB staff prepares guidance to assist in the implementation of PCAOB standards and
rules. The typical legend on such guidance states that the document represents the views of PCAOB staff
and not necessarily those of the Board, and that the document is not a rule, policy, or statement of the
Board. PCAOB staff audit practice alerts are examples of staff guidance that highlight new, emerging, or
otherwise noteworthy circumstances that may affect how auditors conduct audits under existing PCAOB
standards.
See, e.g., AS 3101.12 and AS 2501.

adequate audit documentation to planning and performing the audit and to the supervision
and review of work performed during the audit. Commenters did not express concerns
with the documentation requirement, and the Board adopted it as proposed.
vi.

Auditor communications

See paragraphs .17 through .20 of the new standard.
The Board proposed an explicit requirement for the auditor's report to contain
(i) an expression of opinion on the financial statements, taken as a whole, or an assertion
that an opinion cannot be expressed; and (ii) in an audit of internal control over financial
reporting, an expression of opinion on the effectiveness of the company's internal control
over financial reporting or an assertion that an opinion cannot be expressed. Under the
proposed standard, the auditor would be in a position to express an unqualified opinion
only when the auditor has performed the audit in accordance with standards of the
PCAOB and has obtained sufficient appropriate audit evidence to conclude that: (i) in an
audit of financial statements, the financial statements, taken as a whole, are presented
fairly, in all material respects, in conformity with the applicable financial reporting
framework; and (ii) in an audit of internal control over financial reporting, the company
maintained, in all material respects, effective internal control over financial reporting.
The proposal also briefly addressed when circumstances require an auditor to express a
qualified opinion, adverse opinion, or disclaimer of opinion and referred to AS 3105 and
AS 2201 for a description of those circumstances. The proposed requirements were
retained from AS 1001 with modifications to be consistent with provisions of AS 3101
and AS 2201.
One investor-related group requested that the required communications include
CAMs, and that paragraph .17a of the proposed standard be revised to refer to CAMs "as
a ‘must contain' item in the auditor's report." The commenter was concerned with the low
numbers of CAMs in auditor's reports and that auditors treat the determination of CAMs

as "nearly a ‘check the box' exercise." Another commenter suggested edits to proposed
paragraphs .17 and .19 to align with existing requirements (e.g., adding the phrase "In an
audit of financial statements" to paragraph .17a and moving the phrase "the company's"
within paragraph .19).
The Board adopted paragraphs .17-.19 substantially as proposed with some
modifications. After considering the comments received, the reference to CAMs in a
footnote has been moved to a note to paragraph .17 to emphasize the importance of
CAMs. The Board did not make any additional changes to address concerns regarding
CAMs. The proposal was not designed to address concerns about the frequency or
informative quality of CAMs. Although the Board understands the importance of the
concern raised by commenters, this is outside the scope of this project. The Board also
revised paragraph .17a and paragraph .19 to incorporate commenters' suggestions
described above. Additionally, the Board changed the phrase "modify the report" to
"depart from an unqualified opinion" in paragraph .19 to align with other Board-issued
standards that describe reports that include opinions other than an unqualified opinion.80
The Board proposed in paragraph .20 to require that the auditor communicate
externally in accordance with applicable professional and legal requirements. This is an
overarching requirement to communicate externally that is based on existing auditor
communication requirements (e.g., AS 1301). The Board did not receive any comments
on this requirement and are adopting it with slight modification. The Board changed "as
required by" to "in accordance with" applicable professional and legal requirements to
align with similar phrases used in other Board-issued standards.
Amendments Related to AS 1000
The amendments the Board adopted are described below.

See, e.g., AS 3105.

1.

Amendments to AS 2810 and Rescission of AS 2815

The Board proposed to incorporate into AS 2810 the requirements of AS 2815
regarding the determination of whether the financial statements are presented fairly in
conformity with the applicable financial reporting framework for a more logical
presentation, and to rescind AS 2815. Currently, AS 2810 requires the auditor to evaluate
whether the financial statements are presented fairly, in all material respects, in
conformity with the applicable financial reporting framework, and AS 2815 describes the
meaning of this evaluation. The proposed approach was intended to streamline these
requirements into one standard and eliminate redundant or unnecessary language. A
number of commenters commented on the proposed amendments to AS 2810. After
considering the comments received, the Board adopted amendments to AS 2810 with
certain modifications discussed below.
i.

Clarifying the meaning of "present fairly"

The discussion in the proposing release was designed to clarify the auditor's
existing obligation to evaluate the fairness of the financial statements in conformity with
the applicable financial reporting framework by stating that "present fairly," under extant
PCAOB standards, is a concept that goes beyond mere technical compliance with the
requirements of the applicable financial reporting framework.
Some commenters, primarily investor-related groups, supported clarifying the
meaning of "present fairly" and provided additional suggestions on amendments to AS
2810. Two investor-related groups suggested that the Board consider going further and
require auditors to focus on whether the financial statements are a fair presentation of the
company's position rather than narrowly focusing on whether the company is following
U.S. GAAP. One investor-related group suggested adding the word "and" immediately
before the phrase "in conformity" to make it clear that there is an expectation that the
financials are presented fairly, in all material respects in addition to conforming with the

applicable financial reporting framework. Another group said that auditors should aid in
disclosing and providing transparency around the sensitivity and accuracy of climaterelated estimates and assumptions.
Other commenters, primarily firms and firm-related groups, viewed the proposed
amendments as an expansion of auditors' existing responsibilities. Some commenters
asserted that the statement in the proposal that the auditor's judgments concerning the fair
presentation of the financial statements go beyond compliance with the applicable
financial reporting framework may create a conflict between the auditor's judgment and
management's judgment and introduce potential inconsistency in accounting treatment.
Others expressed concern that under the proposal, auditors would expect the company to
override the requirements of an applicable financial reporting framework if the financial
statements prepared in accordance with the framework did not fairly present the
substance of the company's financial results.
Some commenters suggested retaining language from AS 2815.03 which states,
"The independent auditor's judgment concerning the ‘fairness' of the overall presentation
of financial statements should be applied within the framework of generally accepted
accounting principles. Without that framework, the auditor would have no uniform
standard for judging the presentation of financial position, results of operations, and cash
flows in financial statements." Other commenters suggested explicitly retaining the
concept of professional judgment for evaluation of fair presentation.
The Board's proposed clarification of "present fairly" was not intended to change
the auditor's existing responsibilities for the evaluation of whether the financial
statements are presented fairly in conformity with the applicable financial reporting
framework.
First, the amendments to AS 2810 clarify that "presents fairly" involves
evaluating whether information in the financial statements is presented and classified

appropriately and in a manner that is not misleading, and that this evaluation is made
within the applicable financial reporting framework. Contrary to the views of some
commenters, the amendments do not require auditors to expect that the company override
or deviate from the requirements of the applicable financial reporting framework. Any
override or deviation from the requirements of the applicable financial reporting
framework would normally result in a departure from an unqualified opinion under
PCAOB standards.81 Further, the auditor is required to evaluate the risk of omitted,
incomplete, or inaccurate disclosures as part of the auditor's risk assessment procedures.82
Second, the amendments acknowledge that applicable financial reporting
frameworks recognize that additional disclosures may be needed to ensure fair
presentation. For example, as noted above, the SEC requires by rule that a company
provide further material information as necessary to make any required statements, in the
light of the circumstances under which they are made, not misleading.83 This obligation is
also consistent with the accounting standards issued by the FASB84 and International

See AS 3105. In addition, under SEC rules, a company's "[f]inancial statements filed with
the Commission which are not prepared in accordance with generally accepted accounting principles will
be presumed to be misleading or inaccurate, despite footnote or other disclosures, unless the Commission
has otherwise provided." 17 CFR 210.4-01(a)(1) (Regulation S-X Rule 4-01(a)(1)). Paragraph (a) of that
rule also provides that "the information required with respect to any statement shall be furnished as a
minimum requirement to which shall be added such further material information as is necessary to make
the required statements, in the light of the circumstances under which they are made, not misleading."
See, e.g., AS 2110.67, which requires the auditor, as part of the auditor's evaluation of
fraud risk factors, to include evaluation of how fraud could be perpetrated or concealed by presenting
incomplete or inaccurate disclosures or omitting disclosures that are necessary for the financial statements
to be presented fairly in conformity with the applicable financial reporting framework.
See 17 CFR 210.4-01(a) (Regulation S-X Rule 4-01(a).

84
See, e.g., FASB Accounting Standards Codification ("FASB ASC") paragraph 105-1005-1, Generally Accepted Accounting Principles – Overall – Overview and Background ("Rules and
interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal
securities laws are also sources of authoritative GAAP for SEC registrants."); FASB ASC paragraph 23510-05-3, Presentation – Notes to Financial Statements – Overall - Overview and Background – Importance
of Accounting Policies Disclosure ("The accounting policies of an entity are the specific accounting
principles and the methods of applying those principles that are judged by the management of the entity to
be the most appropriate in the circumstances to present fairly financial position, cash flows, and results of
operations in accordance with generally accepted accounting principles (GAAP) and that, accordingly,
have been adopted for preparing the financial statements.").

Accounting Standards Board ("IASB").85 Thus, when the auditor evaluates whether
company transactions have been recorded and presented in conformity with the
applicable financial reporting framework, the auditor may determine that additional
company disclosures are needed to better reflect the substance of the transactions. Such
evaluation is currently required under both AS 2810.31 and AS 2815.06, and the
requirement is retained in the amendments to AS 2810.30A and .31.
In response to commenters, the Board retained, in the first note to AS 2810.30, the
language of AS 2815.03, with some modifications. Specifically, the Board revised the
reference to "generally accepted accounting principles" to "applicable financial reporting
framework." The Board rephrased the sentence to emphasize that the "applicable
financial reporting framework provides the basis for the auditor's judgment regarding the
presentation of financial position, results of operations, cash flows, and disclosures in
financial statements." The Board also agrees with commenters that the auditor's
evaluation of fairness of presentation of the financial statements is an exercise of
professional judgment in the context of an applicable financial reporting framework. The
first note to AS 2810.30 refers to the auditor's judgment when evaluating the fairness of
the overall presentation of financial statements.

See, e.g., IASB International Accounting Standards ("IAS") 1, paragraph 15, Presentation
of Financial Statements – Financial Statements – General features – Fair presentation and compliance with
IFRSs ("Financial statements shall present fairly the financial position, financial performance and cash
flows of an entity. Fair presentation requires the faithful representation of the effects of transactions, other
events and conditions in accordance with the definitions and recognition criteria for assets, liabilities,
income and expenses set out in the Conceptual Framework for Financial Reporting (Conceptual
Framework). The application of IFRSs, with additional disclosure when necessary, is presumed to result in
financial statements that achieve a fair presentation."); IAS 1, paragraphs 19-24, Presentation of Financial
Statements – Financial Statements – General features – Fair presentation and compliance with IFRSs
(describing financial reporting responsibilities in the "extremely rare circumstances in which management
concludes that compliance with a requirement in an IFRS would be so misleading that it would conflict
with the objective of financial statements set out in the Conceptual Framework"); IAS 8, paragraph 10,
Accounting Policies, Changes in Accounting Estimates and Errors ("In the absence of an IFRS that
specifically applies to a transaction, other event or condition, management shall use its judgement in
developing and applying an accounting policy that results in information that is: (a) relevant to the
economic decision-making needs of users; and (b) reliable, in that the financial statements: (i) represent
faithfully the financial position, financial performance and cash flows of the entity; (ii) reflect the economic
substance of transactions, other events and conditions, and not merely the legal form; (iii) are neutral, ie
free from bias; (iv) are prudent; and (v) are complete in all material respects.").

The Board also added a new footnote to paragraph .30A, as discussed below,
referencing SEC Rule 4-01(a) that describes the company's obligation regarding
additional information that may need to be disclosed in the financial statements so that
the financial statements are not misleading.
ii.

References to SEC Rule 12b-20

The proposed amendment to AS 2810.30 included a new footnote 17A that
referred to a company's responsibility pursuant to SEC Rule 12b-20 under the Exchange
Act, 17 CFR 240.12b-20 ("SEC Rule 12b-20"). That rule requires the company to
disclose "such further material information, if any, as may be necessary to make the
required statements, in the light of the circumstances under which they are made not
misleading."
Most commenters who addressed the proposed citation to SEC Rule 12b-20
expressed concern with it. While one investor-related group recommended relocating the
proposed footnote to the body of the amendments due to its significance, other
commenters suggested removing the reference to SEC Rule 12b-20, with some
commenters objecting primarily because the rule pertains to companies' disclosures
within or beyond the financial statements. Some commenters emphasized that disclosures
beyond the financial statements are the responsibility of companies rather than of
auditors. Many expressed concerns that referring to the rule might be viewed as
expanding the auditor's responsibilities, or would conflict with the auditor's
responsibilities described in AS 3101.08e.86 One of these commenters suggested citing
SEC Rule 4-01(a)(1) instead, because that rule relates specifically to financial statements,
upon which the auditor expresses an opinion.

AS 3101.08e requires that the auditor's report include an opinion that the financial
statements present fairly, in all material respects, the financial position of the company, results of
operations, and cash flows in conformity with the applicable financial reporting framework, and that the
opinion identify the applicable financial reporting framework.

After considering the comments received, the Board deleted proposed footnote
17A with the reference to SEC Rule 12b-20 from the final amendment to AS 2810.30
because that rule reflects a company's responsibilities for information beyond as well as
within the financial statements.87 Instead, the Board retained the existing note to that
paragraph requiring that the auditor look to the requirements of the SEC for the company
under audit with respect to the accounting principles applicable to that company. The
requirements of the SEC for the company under audit are included in SEC Rule 4-01(a),
which the Board referenced in a new footnote to paragraph .30A, to remind auditors of
the company's obligation regarding additional information that may need to be disclosed
in the financial statements so that the financial statements are not misleading.
iii.

Other clarifications to proposed AS 2810.30A

The Board proposed a new paragraph AS 2810.30A based on the extant
requirement from AS 2815.04, using language consistent with other PCAOB standards.
Specifically, the Board:
•

Combined the concepts in AS 2815.04a – b regarding acceptability and
appropriateness of accounting principles and presented them in AS
2810.30Ab;

•

Retained the concepts from AS 2815.04c – d regarding informativeness of
information presented in the financial statements and presented them as a new
AS 2810.30Aa; and

•

Retained the concepts from AS 2815.04e regarding transactions presented in
the financial statements within a range of acceptable limits as a new AS
2810.30Ac and an amendment to AS 2810.31.

87
The auditor's responsibility for other information outside of the financial statements is
specified in AS 2710, Other Information in Documents Containing Audited Financial Statements.

Several commenters expressed concern about not retaining the reference to the
"within a range of acceptable limits" from AS 2815 and suggested (i) retaining this
phrase in AS 2810.30A or (ii) revising proposed 2810.30A to include a footnote
referencing AS 2110 or a note describing the relationship between AS 2810.30A and AS
2110 and adding "in all material respects" to AS 2810.30Ac. Another commenter
suggested defining "a reasonable investor" used in AS 2810.30Aa. One commenter
encouraged the Board to provide guidance on the use of the term "informative" in AS
2810.30A because it could be widely interpreted and applied in practice.
In addition, several commenters suggested including or clarifying certain
terminology or concepts used in the proposed new paragraph, AS 2810.30A. Suggestions
included:
•

Referencing the importance of exercising professional judgment when
evaluating the requirements specified in AS 2810.30A; and

•

Clarifying that (i) "financial statements" include all notes to the statements
and all related schedules;88 and (ii) "disclosures" used in AS 2810.30A means
"accompanying notes," not other information included in management
discussion and analysis ("MD&A") and other disclosures included in the
annual report.

After considering the comments received, the Board retained proposed paragraph
.30A with modifications discussed below.
The final AS 2810.30A requires an auditor, when evaluating whether the financial
statements (including the accompanying notes) present fairly the financial position,
results of operations, and cash flows, in all material respects, in conformity with the
applicable financial reporting framework, to evaluate whether:

See 17 CFR 210.1-01(b) (Regulation S-X Rule 1-01(b)).

a.

The financial statements are informative of matters that may affect their use,

understanding, and interpretation; and the information in the financial statements is
presented and classified appropriately and in a manner that is not misleading;
b.

The accounting principles selected and applied by the company's

management are appropriate in the circumstances; and
c.

Company transactions and relevant events and conditions are appropriately

recognized, measured, and disclosed in the financial statements.
The Board added "(including the accompanying notes)" in AS 2810.30A to clarify
that financial statements include the accompanying notes, to match the description in AS
2810.31 of financial statements as "financial statements (including the accompanying
notes)." Because the Board uses "disclosures" as an interchangeable term with "notes" or
"accompanying notes" throughout PCAOB standards, it is unnecessary to further clarify
the terms in AS 2810.30A. The Board also did not add a reference to professional
judgment in AS 2810.30A, but as discussed above the Board revised the first note to
AS 2810.30 to clarify that the auditor uses professional judgment when evaluating the
fairness of financial statements.
The term "informative" is in AS 2815.04c, which refers to AS 2810.31, which in
turn provides additional considerations for evaluation of information disclosed in the
financial statements (e.g., consideration of the form, arrangement, and the amount of
detail given). To clarify this further, the Board retained in the final standard language
from AS 2815.04c stating that the information in the financial statements is presented
appropriately, in a manner that is "informative of matters that may affect their use,
understanding and interpretation" and not misleading. The Board removed the reference
to "reasonable investor" from AS 2810.30A because it was limiting and did not consider
a broader population of financial statement users (e.g., creditors). The Board also believes
that introducing "reasonable investor" in AS 2810.30A may create confusion by implying

that an analysis is needed that is distinct from determining if the financial statements are
presented fairly in conformity with the applicable financial reporting framework.
Finally, the Board does not believe it is necessary to retain a reference to "within
a range of acceptable limits" in AS 2810.30A. The standard is clear that evaluation of
fairness is based on auditor judgment and that the concept of materiality is inherent in
that judgment, which involves the consideration of qualitative as well as quantitative
factors. The combination of these considerations should be clear that not every
transaction or account is evaluated to arrive at the conclusion that the company's financial
statements, taken as a whole, are presented fairly, in all material respects.
iv.

Other clarifications to proposed AS 2810.31

The Board proposed to revise the note to AS 2810.31 by (i) removing the first
sentence that describes the requirements from AS 3105 (i.e., inadequate disclosures) and
instead adding a reference to AS 3105.24-.27 in paragraph .31, and (ii) adding an extant
requirement from AS 2815.06 for the auditor to also evaluate whether the substance of
transaction or events differs materially from their form, but changing it from "should
consider" to "should evaluate."
Several commenters suggested, in addition to retaining the requirement from
AS 2815.06, to also retain a provision from AS 2815.06 that states "generally accepted
accounting principles recognize the importance of reporting transactions and events in
accordance with their substance." Some commenters suggested not changing the "should
consider" requirement from extant AS 2815.06 to "should evaluate" when evaluating a
transaction in substance over form. Additionally, some commenters recommended
removing or relocating the note in AS 2810.31 to proposed AS 2810.30A for better
context.
Two investor-related groups suggested providing guidance on AS 2810.31 by
adding the existing concept of what the auditors are required to do (per AS 2815.04c)

when the applicable financial reporting framework does not provide guidance (e.g.,
financial statements and accompanying notes do not disclose the necessary information
required), or what considerations should be given by auditors in evaluating fair
presentation of financial statements in accordance with proposed AS 2810.30.
After considering the comments received, rather than amending the existing note
to AS 2810.31, the Board removed the note in its entirety. The Board believes that a
separate requirement to evaluate whether the substance of transactions differs from their
form is unnecessary in light of the requirement in new AS 2810.30Aa. As discussed
above, AS 2810.30Aa requires auditors to evaluate "whether the financial statements are
informative of matters that may affect their use, understanding, and interpretation;" and
the information in the financial statements is presented and classified appropriately and in
a manner that is not misleading. This evaluation includes determining whether additional
disclosures are necessary to reflect, for example, the substance of the company's
transactions. The auditor's evaluation of whether company transactions have been
recorded and presented in conformity with the applicable financial reporting framework
includes the determination of whether additional disclosures are needed in the financial
statements.
The Board also believes that AS 2810.31 and the amendments are comprehensive
and clear, and thus no additional guidance is warranted. For example, under US GAAP
and IFRS, management has a range of conforming choices in selecting classifications and
measurements of revenue recognition, segment reporting, and fair value measurement.
The auditor is responsible for evaluating whether the disclosures reflect the choices made
by management and are not misleading to investors and other financial statement users.
2.

Amendments Related to Engagement Partner Responsibilities for

Supervision
i.

Seeking assistance from other engagement team members

AS 1201 and AS 2101 establish the engagement partner's responsibility for the
engagement and its performance, including planning, supervision, and review. The Board
proposed to amend the existing requirements in AS 1201 and AS 2101 to clarify that
even when the engagement partner seeks assistance from other engagement team
members, the engagement partner retains the primary responsibility for the engagement
and its performance. One commenter strongly supported these amendments, and the
Board adopted them as proposed.
The final notes added to AS 1201 and AS 2101 clarify that while an engagement
partner may seek assistance on specific tasks from other engagement team members, they
continue to retain the primary responsibility for supervising, reviewing, and ensuring the
quality of the work performed in the audit. In other words, the work of other engagement
team members does not replace or reduce the engagement partner's responsibility for the
engagement and its performance.
ii.

Timing of review

The Board also proposed a requirement to clarify that the review and evaluation
by the engagement partner (and as applicable by other engagement team members
performing supervisory activities) of work performed by engagement team members, as
described in AS 1201.05c, must be completed prior to the report release date. These
amendments did not receive any comment and are being adopted as proposed.
iii.

Workpaper review

The Board proposed to amend AS 1201 to clarify the extent of the planning,
supervisory, review, and documentation activities to be performed by the engagement
partner by aligning those activities with existing auditor responsibilities under AS 1015
because the Board believes that the engagement partner's review of audit documentation
is an important part of supervision. These amendments were intended to reaffirm the
engagement partner's supervisory and review responsibilities in the context of exercising

due professional care.89 Specifically, the Board proposed to add a note stating that
notwithstanding assistance from other engagement team members performing
supervisory activities, the engagement partner is required to review sufficient
documentation to determine that (i) the engagement was performed as planned;
(ii) significant judgments were appropriate and significant findings and issues, along with
matters brought to the engagement partner's attention pursuant to AS 1201.05b, were
appropriately addressed; (iii) the conclusions expressed in the auditor's report are
appropriate and supported by sufficient appropriate evidence; and (iv) matters requiring
communication under applicable professional and legal requirements are appropriately
identified and communicated. The proposed note also provided that the engagement
partner's review includes review of documentation of significant findings or issues90 and
review of documentation that is also subject to review by the EQR, citing the provisions
of AS 1220 that specifically require the EQR to review certain documentation.91
One commenter stated that the proposed amendments were overly prescriptive
and should allow more flexibility regarding the engagement partner's review and sign-off.
Another commenter recommended clarifying how due professional care in AS 1201
relates to the engagement partner's responsibilities in AS 1000. This commenter further
recommended better aligning AS 1201 with proposed AS 1000.09, including the
interplay between Note 2 of AS 1201.05, which has specific workpaper review
requirements by the engagement partner, while AS 1201.04 also allows the engagement
partner to seek assistance from other engagement team members.
After considering the comments received, the Board adopted amendments to
AS 1201 substantially as proposed. The Board believes that the amendments clarify the

See AS 1000.10 discussed above.

See AS 1215.12.

See AS 1220.09-.10 and .14-.15.

engagement partner's existing obligations for supervision and review. As the engagement
team member with primary responsibility for the engagement, the engagement partner
must review, at minimum, sufficient documentation of specific audit areas that are
deemed important to support the auditor's opinion. Without reviewing sufficient
documentation in these areas, the engagement partner would not be able to demonstrate
that the engagement partner has the primary responsibility for the audit.
One commenter asserted that the proposed requirement that the "engagement
partner's review should include review of documentation … subject to review by the
engagement quality reviewer" could be interpreted to require the engagement partner to
review all documentation reviewed by the EQR, beyond what is required in AS 1220.10
or .15. Another commenter expressed concern about the proposed note stating that in
multi-tiered audits, other audit partners, not only the engagement partner, should retain
the ability to review all documentation subject to EQR review. This commenter
suggested not linking engagement partner review requirements to documentation subject
to review by EQR.
In response to the commenters, the Board clarified the final requirement by
changing the phrase "review of documentation subject to review by the engagement
quality reviewer" to "review of documentation required to be reviewed by the
engagement quality reviewer pursuant to the requirements of paragraphs .09-.10 and .14.15 of AS 1220 …." This revision further clarifies that the Board expects the engagement
partner to review the documentation that the engagement quality reviewer is required to
review in order to comply with those provisions of AS 1220, rather than all of the
documentation that the engagement quality reviewer may have actually reviewed. The
Board believes that the documentation of significant judgments made and conclusions
reached by the engagement team that is required to be reviewed by the EQR provides
important information to the engagement partner. This is true for all engagements,

including multi-location and multi-tiered engagements. The extent of documentation
reviewed by the EQR and, under the final amendment, by the engagement partner, will
depend on the facts and circumstances of the particular engagement. Further, the
requirement for the engagement partner to review documentation required to be reviewed
by the EQR does not preclude other engagement team members performing supervisory
activities to also review this documentation.
Several commenters further expressed concerns that the proposed amendments
create an incorrect perception that the responsibility for all phases of the audit resides
with the engagement partner only without any consideration given to the responsibility of
the firm or other engagement team members. One of these commenters further suggested
including a statement that the engagement partner should tailor the extent of their
supervision based on a variety of factors as described in AS 1201.06. AS 1201.05
specifically addresses the responsibilities of the engagement partner relating to
supervision of engagement team members, and the Board does not think it is necessary to
change these requirements to address the responsibilities of others.
One commenter stated that the engagement partner's review of documentation to
determine that the engagement was performed as planned may be construed as expanding
the partner review requirements beyond AS 1215.12c because the review of
documentation only relates to "results of auditing procedures that indicate a need for
significant modification of planned auditing procedures." The Board does not believe that
Note 2 of AS 1201.05 expands the engagement partner's responsibilities. AS 2101.03
states that the engagement partner is responsible for planning the audit and that the
engagement partner retains primary responsibility for the engagement and its
performance. In addition, the documentation requirements under AS 1215 are not limited
to the significant findings and issues described in AS 1215.12 and there are other
documentation requirements outside of documenting specific matters.

Another commenter further suggested that the Board define "sufficient
documentation" used in proposed Note 2 of AS 1201.05. The Board does not believe this
is necessary. What is sufficient will depend on the facts and circumstances of the
particular engagement under review. The amount of documentation that the engagement
partner would review will vary depending on the associated risk involved in the audit
area and the nature of the work performed that the engagement partner reviews. The
Board further clarified this point, by changing "sufficient documentation to determine" to
"documentation sufficient to determine" in the final amendment. This change is designed
to better connect the concept of sufficiency with the matters that the engagement partner
will determine.
The Board also proposed other amendments to AS 1201 and AS 2101 to conform
to the adoption of AS 1000. These technical and clarifying amendments included
replacing references to titles of existing standards with the title of the new standard and
updating cross-referenced terminology and paragraph citations. The Board adopted these
other amendments as proposed as no comments were received.
3.

Amendments Related to Documentation

The Board proposed several amendments to AS 1215 discussed in more detail
below. Commenters generally supported the proposed amendments to AS 1215. Some
commenters provided specific comments related to (i) documentation completion date
and (ii) specific audit documentation and timing for documentation review. These are
discussed in more detail below.
i.

Documentation completion date

Audit documentation is the written record of the basis for the auditor's
conclusions that provides the support for the auditor's representations, whether those
representations are contained in the auditor's report or otherwise. Audit documentation
also facilitates the planning, performance, and supervision of the engagement, and is the

basis for the review of the quality of the work because it provides the reviewer with
written documentation of the evidence supporting the auditor's significant conclusions.92
Under existing standards, a complete and final set of audit documentation is required to
be assembled for retention as of a date not more than 45 days after the report release date,
known as the documentation completion date.93 The Board proposed to accelerate the
documentation completion date by reducing the maximum period from 45 days to 14
days.
Many commenters who addressed the amendment generally supported it or agreed
that the proposed acceleration of the documentation completion date would be
appropriate or result in increased audit quality. Two commenters further stated that the
shorter period of 14 days would not cause significant changes at most firms.
Several commenters raised concerns over the acceleration of the documentation
completion date. One commenter stated that the acceleration would likely lead to more
audit quality issues due to the increasingly more complex financial accounting, reporting,
and auditing landscape requiring more time as well as the current talent crisis. Another
commenter stated that 14 days is too short to handle any unforeseen consequences (e.g.,
technology interruptions). Another commenter questioned whether acceleration of
documentation will (i) have any meaningful impact on PCAOB inspection timelines and
operating efficiencies and (ii) be workable for smaller firms, who may not have the
technology to implement this change.
Two commenters, both investor-related groups, recommended further shortening
the documentation completion date to two days because an earlier PCAOB inspection
would benefit investors. These two investor-related groups and another commenter
questioned why 14 days is a more appropriate timeframe. Focusing on challenges that

See AS 1215.02.

See AS 1215.15.

smaller firms may face in implementing the acceleration, and the diversity across global
network firms in documentation archive systems, several commenters recommended a
phased implementation approach or extending the implementation over a longer period
(e.g., two-year period).
The proposal also sought comment, in light of the proposed 14-day
documentation completion date, on whether firms would have difficulty, when filing
Form AP within 35 days of the audit report being filed, complying with AS 1215.16. That
paragraph of AS 1215 prohibits the deletion or discarding of audit documentation after
the documentation completion date but permits the addition of documentation under
certain conditions. Two firms stated that they did not foresee significant difficulties in
complying with AS 1215.16 with additional costs, while another firm indicated some
technological and process challenges. Two commenters recommended making both due
dates (i.e., documentation completion date and Form AP due date) the same.
After considering the comments received, the Board adopted the accelerated
documentation completion date of 14 days as proposed with modification to the effective
date for certain firms discussed below. The 14-day timeline strikes a good balance of
meeting the objectives of this amendment (e.g., enhance investor protection by enabling
the Board to begin the inspection process sooner after the completion of an audit) while
still allowing a two-week period (14 calendar days) to assemble audit documentation for
retention (i.e., archive audit documentation). As echoed by some commenters, the Board
believes that the accelerated documentation period will not require a significant change
for many firms. In the Board's view, the changes to the archiving period (i.e., 14 days) are
necessary to focus auditors on assembling a complete set of audit documentation that is
high-quality and without documentation errors or omissions in a timely manner. The
Board believes that a delay in assembling the audit documentation increases the potential
for omissions to occur.

Further, shortening the archiving period also reduces the window of opportunity
for improper alteration of audit documentation and increases the quality of
documentation because recalling and describing audit procedures long after the work was
actually performed can be difficult.
In accordance with AS 1215, the auditor must have completed all necessary
auditing procedures and obtained sufficient evidence to support the representations in the
auditor's report before the report release date.94 The presence of complex financial
accounting, reporting, or auditing matters should not have a bearing on the archiving
period as the effects of such matters on the audit should be addressed before the report
release date (i.e., before the 14 days to assemble the audit documentation). Under existing
AS 1215.16 auditors are allowed to add documentation after the documentation
completion date, if needed.95 While the Board understands that in practice some firms use
a short archiving period, the Board believes that an archiving period of two days, as
suggested by investor-related groups, may be too short to handle any unforeseen
consequences (e.g., technology interruptions) and could result in inadvertent noncompliance.
The Board also continues to believe that the accelerated documentation
completion date of 14 days is still appropriate even when considering the Form AP
deadline of 35 days. The Board acknowledged that in most situations, firms currently
have 35 days to file Form AP,96 and a firm must document the computation of total audit

See AS 1215.15 (as amended).

See AS 1215.16.

Form AP has a filing deadline of 35 days after the date the auditor's report is first
included in a document filed with the SEC, or 10 days after the auditor's report is first included in a
document filed with the SEC for a registration statement under the Securities Act of 1933. PCAOB Rule
3211(b).

hours and include that computation in the files.97 If the actual hours become available
after the documentation completion date but before the Form AP filing, the auditor is
required under provisions of AS 1215 to add that information to the audit documentation
after the documentation completion date.98 The instructions to Form AP also provide that
firms may use a reasonable method to estimate audit hours when actual hours have not
been reported or are otherwise unavailable.99
The Board acknowledged that certain firms may have less technologically
advanced systems in place and may need more time to implement new processes to
comply with the accelerated documentation completion date requirement. Therefore, as
discussed in more detail below, the effective dates for this requirement allow a phased-in
approach for smaller firms to comply with the 14-day documentation completion date.
This approach addresses implementation challenges that some commenters suggested
smaller firms may face.
ii.

Specific audit documentation and timing of review

The Board also proposed to emphasize that audit documentation must clearly
demonstrate who performed the work, who reviewed the work, and the date of such
review.100 In order for an engagement partner to conclude that the audit evidence
obtained is sufficient and appropriate to support the opinion expressed in the auditor's
report,101 the audit work is required to be reviewed prior to the report release date.
Therefore, the Board also proposed to amend AS 1215.15 to clarify that, before the report

See Improving the Transparency of Audits: Rules to Require Disclosure of Certain Audit
Participants on a New PCAOB Form and Related Amendments to Auditing Standards, PCAOB Rel. No.
2015-008 (Dec. 15, 2015).
See AS 1215.16.

See Instructions to Form AP, Part IV – Responsibility for the Audit is Not Divided.

See AS 1215.06.

See AS 2810.02.

release date, the engagement partner and other engagement team members performing
supervisory activities have completed their reviews of audit documentation.
One commenter raised a concern that the amendments may result in lower quality
documentation and an increase in late filings, providing an example of when a significant
issue emerged closer to the issuer's filing deadline, because additional time to complete
and review the relevant documentation would be needed. Another commenter suggested
further clarifying whether the engagement partner and other supervisors must ensure that
all review notes have been sufficiently addressed prior to the report release date.
The Board adopted the amendments to AS 1215 as proposed. The requirement for
the engagement partner and other supervisors to review relevant audit documentation
prior to the report release date is a clarification of existing requirements in AS 1215 and
AS 2101. As discussed earlier, since the auditor's report is dated no earlier than the date
on which the auditor has obtained sufficient appropriate evidence to support the auditor's
opinion,102 the auditor must have completed all necessary auditing procedures, including
documentation to support the work performed that is reviewed by the engagement partner
and other reviewers, on or before the auditor's report date, in all cases. The engagement
partner and other supervisors should refer to existing requirements in AS 1215.07, in
determining the sufficiency of audit documentation. Several factors to consider include
nature of the audit procedure, risk of material misstatement associated with the assertion,
and extent of judgment required in performing the work and evaluating the results (i.e.,
accounting estimates require greater judgment and commensurately more extensive
documentation).103
Lastly, in relation to proposed amendments in AS 1215.06 and .06A, one
commenter agreed with the addition of paragraph .06A but suggested removing the

See paragraph .01 of AS 3110, Dating of the Independent Auditor's Report.

See AS 1215.07.

phrase of "who performed the work, the person or persons who reviewed the work, and
the date of such review" in AS 1215.06 because the same phrase is already included in
AS 1215.06Ab. The Board did not make changes to the final amendments to AS 1215.06
and .06A. The addition of the phrase in paragraph .06 is an intentional clarification, rather
than duplication, of what the audit documentation is required to demonstrate. The
requirement in paragraph .06, is different, and relates to the sufficiency of documentation
needed to meet the experienced auditor threshold.
The Board also proposed other amendments to AS 1215 to conform to AS 1000.
These technical and clarifying amendments included replacing references to titles of
existing standards with the title of the new standard and updating cross-referenced
terminology and paragraph citations. The Board did not receive any comments relating to
other amendments to AS 1215 and adopted those as proposed.
4.

Other Amendments

In connection with the adoption of AS 1000, the Board also adopted other
amendments to several PCAOB standards to conform with AS 1000, amendments to
AS 2810, and rescission of AS 2815. These amendments include superseding the
foundational auditing standards.
The other changes adopted include replacing references to titles of existing
standards with the title of the final standard and updating cross-referenced terminology
and paragraph citations.
The proposed amendments that received comments are discussed in more detail
below.
i.

Amendments to AS 2710, Other Information in Documents Containing
Audited Financial Statements

AS 2710.05 refers to differences in the auditor's judgment or opinion. The Board
proposed to amend that standard in two ways, by clarifying that the difference of

judgment or opinion is "between the auditor and the client," and by adding a footnote
clarifying the meaning of "judgment." One commenter suggested replacing "the client"
with "management" to be consistent with other PCAOB standards. Although the Board
adopted other amendments that refer to the management and audit committee of the
company under audit rather than to the auditor's "client," the Board did not make this
change throughout the auditing standards because such a sweeping change is outside the
scope of this project and may not be warranted in each instance, and thus could create
confusion. Because "client" is used in AS 2710 throughout the standard, the Board
retained the use of that term in the existing standard and in the amendment, and thus
adopted the amendments to AS 2710.05 as proposed.
ii.

Amendments to AS 3101, The Auditor's Report on an Audit of Financial
Statements When the Auditor Expresses an Unqualified Opinion

The Board proposed to move certain language in paragraph .01 of AS 3101 to AS
1000. The Board also proposed to move footnote 2 that describes the term "taken as a
whole" to paragraph .02 of AS 3101. Two commenters on the proposed amendments to
AS 3101 suggested amending paragraph .11 and paragraph .14, primarily due to the
declining number of CAMs disclosed by firms. Other commenters suggested adding
language about the meaning of reasonable assurance means and the limitation of the audit
in the auditor's report (paragraph .09 and Appendix B). The Board did not make these
changes suggested by commenters because they are outside the scope of this project.
One commenter expressed concern that the meaning of "taken as a whole" was
changed because a footnote was added to AS 3101.02. As discussed above, the Board did
not change the meaning of "taken as a whole" by moving the existing footnote to another
paragraph. The Board therefore adopted the amendments as proposed.
iii.

Amendments to AS 4105, Reviews of Interim Financial Information

The Board proposed to replace references to titles of existing standards with the
title of the final standard and update cross-referenced terms and paragraph citations in
paragraphs .01 and .07. Three commenters noted that the amendments are appropriate.
One commenter suggested adding "to the extent those standards are relevant" in AS
4105.01 when referencing AS 1000 because interim reviews are not required to provide
reasonable assurance. The Board believes this addition is not necessary because the
amendment refers only to compliance with independence and ethics requirements,
competence, and exercise of due professional care, which are fundamental to any audit,
review, or attestation engagements under the PCAOB standards. All of these concepts are
relevant to AS 4105 without exception. The Board adopted the amendments as proposed.
iv.

Amendments to Attestation Standards

The Board proposed to replace references to titles of existing standards with the
title of the final standard and update cross-referenced terms and paragraph citations. One
commenter on these amendments stated that they are appropriate. Another commenter
offered suggestions to (i) limit the references to AS 1000 in attestation standards because
the general principles and responsibilities in AS 1000 should be specifically tailored to
attestation engagements to be operable, (ii) retain paragraph .41 of AT Section 101, Attest
Engagements a reference to Cooley on Torts, which was removed, and (iii) change the
reference in footnote 9A of Attestation Standard No. 2, Review Engagements Regarding
Exemption Reports of Brokers and Dealers, as "review" engagement as opposed to
"examination" engagement. The Board noted that the references to AS 1000 have been
tailored to the attestation standards. The Board did not retain the reference to the 1932
treatise Cooley on Torts because, as the Board explained when it proposed AS 1000, that
reference is unnecessary and AS 1000 explains the concept of due professional care in

plain language without changing its meaning.104 The Board revised the footnote of AT
No. 2 to refer to a "review" engagement. Otherwise, the Board adopted the amendments
as proposed.
EFFECTIVE DATE
In the proposing release, the Board sought comment on the amount of time
auditors would need before the proposed standard and related proposed amendments to
PCAOB standards would become effective, if adopted by the Board and approved by the
SEC. The Board proposed an effective date of June 30 of the year after approval by the
SEC.
A number of commenters, mostly firms, suggested that an effective date be based
on a fiscal year end date (e.g., audits of fiscal years ending on or after December 15)
rather than the proposed effective date of June 30 in the year after SEC approval. These
commenters generally pointed to challenges associated with a mid-year implementation
(e.g., need to update firm methodologies for foundational standards and for performance
standards amended by this project, provide training). Specific dates suggested by
commenters included: (i) audits of periods beginning on or after December 15, 2024
(assuming 2023 SEC approval); (ii) 12 months after SEC approval; (iii) 18 months after
SEC approval; and (iv) 24 months after SEC approval.
In addition, a firm and a firm-related group suggested that the Board consider the
effective dates for other standard-setting projects such as QC 1000 when setting the
effective date for AS 1000. In response to commenters, and after considering the
effective dates for other Board rulemaking projects, the Board revised the effective date
for the new standard and related amendments.

See PCAOB Rel. No. 2023-001, at 22.

Subject to approval by the SEC, the new standard and related amendments will
take effect for audits of financial statements for fiscal years beginning on or after
December 15, 2024, except for the 14-day documentation completion date requirement
(AS 1215.15). For that requirement, the Board adopted a phased approach to provide
smaller firms more time to prepare for implementation. The requirement will take effect
as follows:
•

For public accounting firms that, during the calendar year ending December
31, 2024, issued audit reports with respect to more than 100 issuers, the 14day documentation completion requirement will take effect for audits of
financial statements for fiscal years beginning on or after December 15, 2024;
and

•

For all other registered public accounting firms, the 14-day documentation
completion requirement will take effect for audits of financial statements for
fiscal years beginning on or after December 15, 2025.

The Board believes that changing the effective date to fiscal years beginning on or
after December 15, 2024 responds to commenters who (i) expressed concerns about
having a mid-year implementation and (ii) suggested that an effective date be based on a
fiscal year-end date. Given the nature of requirements of the new standard and related
amendments, as well as the extent of the differences between the new standard and the
foundational standards, the Board believes that the general effective date will provide
auditors with reasonable time to implement the new standard and related amendments.
Further, extending the effective date for implementation of the 14-day documentation
completion date requirement responds to the need articulated by commenters to provide
smaller firms more time to prepare for implementation.
D.

Economic Considerations and Application to Audits of Emerging Growth

Companies

The Board is mindful of the economic impacts of its standard setting. This section
describes the economic baseline, need, and expected economic impacts of the final
standard and related amendments, as well as alternative approaches considered by the
Board. Due to data limitations, the economic analysis is generally qualitative in nature.
The Board sought and received comments on the economic analysis in the
proposing release.105 A majority of the commenters expressed views related to the
economic analysis, and they generally agreed with the need for the standard. Some
commenters suggested that the use of certain proposed language or certain proposed
clarifications could result in potential confusion or expansion of auditors' responsibilities
or that the proposed removal of certain extant explanatory language could reduce
transparency regarding the meaning of the general principles and responsibilities and
exacerbate an audit expectation gap. Some commenters suggested that the economic
analysis should more carefully consider potential costs or unintended consequences
associated with certain key provisions. These comments are addressed below. One
commenter asserted that costs that have not been analyzed, quantitatively or qualitatively,
include costs to firms from new legal duties and auditor responsibilities. The commenters
did not provide data to support their concerns about potential costs and unintended
consequences. Their views were based on interpretations that the Board's proposal would
make broader changes. However, the Board believes the economic analysis is appropriate
and consistent with the limited scope of changes the rulemaking requires. Commenters
generally agreed that accelerating the documentation completion date is feasible for firms
and beneficial to investors, although some commenters noted potential costs or
questioned the expected benefits. One commenter suggested potential unintended
consequences associated with clarifying engagement partner responsibilities. Three

See id. at 55-57.

commenters referenced additional academic research for the Board's consideration. These
comments are addressed below.
The Board considered all of the comments received and have developed an
economic analysis below that includes these considerations and evaluates the expected
benefits and costs of the final standard and related amendments, discusses potential
unintended consequences, and facilitates comparison to alternative actions considered.
Specific input is discussed where relevant in the analysis that follows.
A.

Baseline
The discussion above describes important components of the baseline against

which the economic impacts of the standard can be considered, including an overview of
existing requirements. Below is the Board's discussion of additional matters that
informed its understanding of the baseline for each of the changes.
1.

Modernization of the Foundational Standards

The discussion above provides an overview of existing requirements of the
auditing standards that describe the general principles and responsibilities of the auditor
in conducting an audit in accordance with the standards of the PCAOB (i.e., foundational
standards). The general principles and responsibilities addressed by the foundational
standards are described above and include reasonable assurance, due professional care,
professional skepticism, independence, competence, and professional judgment.
The foundational standards are required to be followed in every audit conducted
in accordance with PCAOB standards. The general principles and responsibilities in the
foundational standards are reflected in firm methodologies, commercially published
guidance, and other technical tools. Although there may be circumstances where some
auditors' understanding of the general principles and responsibilities is made more
difficult than necessary by how the foundational standards are organized and written, the
Board does not have evidence that auditors are systematically confused about the

meaning of the general principles and responsibilities or that the foundational standards
are insufficient to support high-quality audits, when applied appropriately.
One commenter suggested there is no evidence that audit personnel are unclear or
uncertain about the meaning of the proposed requirements. An investor-related group
noted that the proposed standard was consistent with the extant standards.
The views expressed by the commenters align with the Board's belief that the core
general principles and responsibilities encompassed by the foundational standards are
well-established and sound. While the foundational standards are currently spread across
four standards (i.e., AS 1001, AS 1005, AS 1010, AS 1015), contain some extraneous
restrictive language, and do not emphasize the investor protection obligation as
prominently as desired, applied appropriately, they are sufficient to support high-quality
audits.
2.

Clarification of Engagement Partner Responsibilities

Under PCAOB standards, engagement partners are responsible for the
engagement and its performance, including the proper planning and supervision of the
engagement and its compliance with PCAOB standards. While engagement partners are
permitted to seek assistance from other team members performing supervisory activities,
engagement partners are responsible for proper supervision of the engagement and have
primary responsibility for the engagement.
As discussed in the proposal, the staff reviewed firms' available methodology
documentation to obtain an understanding of firms' policies and practices for engagement
partner review.106 A number of larger firms have developed specific guidance, checklists,
and other tools to facilitate the engagement partner's review. For example, some firms
mandate the use of tools that specify workpapers or topics that engagement partners are

See id. at 36.

required to review directly. These tools require the engagement partner to document their
review. Conversely, similar policies of some smaller firms are designed to be applied at a
higher level and are not as specific about the required review.107 The Board did not
receive comments that provided additional information addressing the baseline for
engagement partner review.
3.

Accelerating the Documentation Completion Date

The auditor is required to complete all necessary auditing procedures, review
those procedures, and obtain sufficient appropriate audit evidence prior to the report
release date. Auditors may need some time after the report release date to assemble the
final audit file and complete the audit documentation. The PCAOB standard on audit
documentation currently requires completion of documentation within 45 days after the
report release date.
When PCAOB inspection staff select issuer audits for inspection, PCAOB notice
of inspection and access to firm audit documentation generally do not occur until after the
documentation completion date. After an inspection is complete, the Board issues a report
on the inspection, and a portion of each report is made available to investors and the
public on the PCAOB's website.
As discussed in the proposal, the staff reviewed firms' stated archiving policies
and firms' archiving practices to obtain an understanding of firms' policies and practices
for completing audit documentation.108 The Board found a wide range of archiving
periods among firms, from the full 45-day period to a much shorter period. In addition,
PCAOB staff has observed that certain firms require audit documentation to be archive-

The observations in this paragraph are based on the staff's review of the policies of U.S.
global network firms ("GNFs") and U.S. non-affiliate firms ("NAFs"). GNFs are the member firms of the
six global accounting firm networks (BDO International Ltd., Deloitte Touche Tohmatsu Ltd., Ernst &
Young Global Ltd., Grant Thornton International Ltd., KPMG International Ltd., and
PricewaterhouseCoopers International Ltd.). NAFs are both U.S. and non-U.S. accounting firms registered
with the Board that are not GNFs. Some of the NAFs belong to international networks.
108

See PCAOB Rel. No. 2023-001, at 37.

ready upon completion of interim audit procedures. The PCAOB established the 45-day
period in 2004109 when firms relied more on paper documentation and needed time to
copy, collate, finalize, and file workpapers. PCAOB staff has observed that most firms
today have electronic audit tools and audit software that either make those tasks
unnecessary or enable the tasks to be performed much faster.
Some U.S. GNFs require engagement teams to archive audit documentation
within 10 days after the report release date. Other firms require engagement teams to
archive audit documentation within longer periods (ranging from 30 to 45 days after the
report release date). Of the firms with policies that allow longer periods, certain of them
express expectations to complete documentation within a much shorter period.
All GNFs have established global policies for archiving to be used by their
respective non-U.S. affiliate firms. The global policies generally allow for completion of
documentation not more than 45 days after the report release date. The global policies of
certain GNFs specify a documentation completion date within 14 days after the report
release date, or sooner when required by local laws or regulations. In addition to the
global policies, certain non-U.S. affiliates of GNFs have local policies requiring
documentation completion dates earlier than their respective global policies. Examples
observed through the PCAOB's 2022 inspections include non-U.S. affiliates that have
local policies specifying completion of documentation by deadlines such as 2 days, 7
days, 10 days, 14 days, and 30 days after the report release date. Additionally, even
among certain non-U.S. affiliates that have stated policies of 45 days after the report
release date, their documentation systems require completion of documentation within 15
to 40 days (depending on the firm). Generally, non-U.S. affiliates of GNFs use electronic
audit documentation systems for documentation and archiving.

109
See Audit Documentation and Amendment to Interim Auditing Standards, PCAOB Rel.
No. 2004-006 (June 9, 2004), at 5.

The archiving policies of NAFs generally specify a documentation completion
date of 45 days after the report release date. PCAOB staff has observed certain NAFs
annually inspected by the PCAOB that, in practice, typically archive documentation
within 40 days of the report release date. In addition, PCAOB staff has noted that certain
other NAFs generally complete their documentation at the end of the full 45-day
archiving period. While most NAFs use electronic audit documentation systems, PCAOB
staff is aware that some smaller firms still use paper-based workpapers.
The Board did not receive comments specific to the baseline for the
documentation completion date, including additional information on firms' current
archiving policies and practices.
B.

Need
The changes introduced in the final standard are part of the Board's effort to

continuously improve and update PCAOB standards. In practice, PCAOB standards are
used by auditors, who are responsible for applying the general principles and
responsibilities of the foundational standards. Investors and other stakeholders may also
rely on the foundational standards (directly or indirectly) to establish expectations about
auditor responsibilities.
1.

Problem to be Addressed

i.

Modernization of the foundational standards

The Board identified three potential concerns about the foundational standards:
(i) compliance with the standards; (ii) soundness of the general principles and
responsibilities; and (iii) clarity of the standards. The next three subsections explain that
the Board does not see a need to make changes to the standards based on compliance with
the standards or soundness of the general principles and responsibilities, but does see a
need to make changes to modernize and enhance the clarity of the foundational standards.
a.

Compliance with the foundational standards

In some instances, auditors have not performed audits in compliance with the
foundational standards. For example, for the years 2018-2022, the PCAOB issued almost
two dozen enforcement orders that described the violation of at least one of the
foundational standards. One commenter, an academic, noted research that suggests that
audit failures often relate to basic areas of auditor responsibility, such as failure to gather
sufficient appropriate audit evidence, failure to exercise due professional care, or
insufficient professional skepticism.110 The commenter added that contributing factors to
the noted failures appear to be auditor disincentives to be skeptical111 or high auditor
workloads.112 For example, research indicates that professional skepticism could be
affected by priorities such as engagement budgets rather than investor protection.113 The
commenter also suggested that persistent audit deficiencies, despite PCAOB inspection
and enforcement efforts, highlight the importance of auditors' understanding of and
compliance with foundational auditing principles.114 The views expressed by the
commenter seem to align with the Board's understanding of auditors' adherence to the
foundational standards and the Board's assessment of the need to modernize and clarify
those standards, including a reaffirmation of the auditor's obligation to protect investors.
b.

Soundness of the general principles and responsibilities

110
See, e.g., Mark S. Beasley, Joseph V. Carcello, Dana R. Hermanson, and Terry L. Neal,
An Analysis of Alleged Auditor Deficiencies in SEC Fraud Investigations: 1998-2010 (commissioned by
Center for Audit Quality) (May 2013).
111
See, e.g., Joseph F. Brazel, Scott B. Jackson, Tammie J. Schaefer, and Bryan W. Stewart,
The Outcome Effect and Professional Skepticism, 91 The Accounting Review 1577 (2016) and Joseph F.
Brazel, Christine Gimbar, Eldar M. Maksymov, and Tammie J. Shaefer, The Outcome Effect and
Professional Skepticism: A Replication and a Failed Attempt at Mitigation, 31 Behavioral Research in
Accounting 135 (2019).
112
See, e.g., Julie S. Persellin, Jaime J. Schmidt, Scott D. Vandervelde, and Michael S.
Wilkins, Auditor Perceptions of Audit Workloads, Audit Quality, and Job Satisfaction, 33 Accounting
Horizons 95 (2019).
113
See, e.g., Brazel et al., The Outcome Effect and Professional Skepticism and Brazel et al.,
The Outcome Effect and Professional Skepticism: A Replication and a Failed Attempt at Mitigation.

See, e.g., Ashna L. Prasad and John C. Webster, What Are the Trends in PCAOB
Inspections and the Reported Audit Deficiencies? 37 Journal of Accounting, Auditing & Finance 523
(2022).
The foundational standards address the general principles and responsibilities of
reasonable assurance, due professional care, professional skepticism, independence,
competence, and professional judgment. These principles and responsibilities are
interconnected. For example, due professional care requires the auditor to exercise
professional skepticism, including a questioning mind and a critical assessment of audit
evidence. Audit procedures performed with due professional care allow the auditor to
obtain reasonable assurance about whether the financial statements are free of material
misstatement. Reasonable assurance is achieved, in part, by the exercise of professional
judgment, which involves the auditor making decisions based on applying relevant
training, knowledge, and experience. There is ample published research that studies
alternative versions of these general principles and responsibilities. Below is a summary
of several papers that demonstrate an ongoing debate regarding alternatives.
As noted in the proposal,115 academic research regarding professional skepticism
provides a model that identifies two components – skeptical judgment and skeptical
action – that are necessary for the effective exercise of professional skepticism.116 In a
synthesis of literature on professional skepticism, researchers conclude that professional
skepticism is foundational to the performance of a high-quality audit, and they note that
academic research tends to focus on skeptical judgment while PCAOB inspections tend
to focus on skeptical action.117 When accountability to regulators is an incentive based on
principles, research suggests that auditors may exhibit more skeptical judgment.118 When

See PCAOB Rel. No. 2023-001, at 39.

116
See Mark W. Nelson, A Model and Literature Review of Professional Skepticism in
Auditing, 28 Auditing: A Journal of Practice & Theory 1, 5 (2009).

See R. Kathy Hurtt, Helen Brown-Liburd, Christine E. Earley, and Ganesh
Krishnamoorthy, Research on Auditor Professional Skepticism: Literature Synthesis and Opportunities for
Future Research, 32 Auditing: A Journal of Practice & Theory 45, 47 (2013). According to the authors,
"Skeptical judgment occurs when an auditor recognizes that a potential issue may exist and that more work
or effort is necessary. Skeptical action occurs when an auditor changes his/her behavior based on the
skeptical judgment. Both skeptical judgment and skeptical action are essential to the audit, with skeptical
judgment being a necessary condition for skeptical action."
118

See Hurtt, et al., Research on Auditor 62.

accountability is based on a checklist mentality of following a set of strictly specific
requirements, research suggests that auditors may engage in cognitive processing that
reduces skeptical judgment.119 On the other hand, a principles-only approach to standards
may provide insufficient guidance to support the exercise of judgment.120 Overall,
therefore, there is a spectrum of possible approaches to audit regulation that lies between
excessively vague principles and excessively specific requirements. In practice, effective
auditing standards may fit into the middle of that spectrum by emphasizing core
principles while including some specific requirements to help support skeptical judgment
and skeptical action.121 One commenter, an academic, noted that research on rules- versus
principles-based requirements for independence and ethics suggests that a combination of
rules and principles is likely to be the most effective approach.122
One commenter referenced several academic papers and highlighted pragmatic
challenges and costs auditors face when applying the concept of professional
skepticism.123 The commenter reported that past economic research finds violations of
professional skepticism underlying audit deficiencies.124 The commenter also reported

119
See M. David Piercey, Documentation Requirements and Quantified versus Qualitative
Audit Risk Assessments, 30 Auditing: A Journal of Practice & Theory 223, 242-43 (2011).

See, e.g., SEC, Study Pursuant to Section 108(d) of the Sarbanes-Oxley Act of 2002 on
the Adoption by the United States Financial Reporting System of a Principles-Based Accounting System
(July 25, 2003).
121

See, e.g., AS 1210, Using the Work of an Auditor-Engaged Specialist.

See, e.g., Terri L. Herron and David L. Gilbertson, Ethical Principles vs. Ethical Rules:
The Moderating Effect of Moral Development on Audit Independence Judgments, 14 Business Ethics
Quarterly 499 (2004) and Bryan K. Church, J. Gregory Jenkins, and Jonathan D. Stanley, Auditor
Independence in the United States: Cornerstone of the Profession or Thorn in Our Side? 32 Accounting
Horizons 145 (2018).
See, e.g., Brazel et al., The Outcome Effect; Ashleigh L. Bakke, Elizabeth N. Cowle,
Stephen P. Rowe, and Michael S. Wilkins, How Do Audit Firms Treat Partners Who Issue Adverse
Internal Control Opinions? Available at SSRN:
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4383557 (2023); Richard C. Hatfield, Scott B.
Jackson, and Scott D. Vandervelde, The Effects of Prior Auditor Involvement and Client Pressure on
Proposed Audit Adjustments, 23 Behavioral Research in Accounting 117 (2011); and Sandra Waller
Shelton, The Effect of Experience on the Use of Irrelevant Evidence in Auditor Judgment, 74 The
Accounting Review 217 (1999).
124
See, e.g., Mark S. Beasley, Joseph V. Carcello, and Dana R. Hermanson, Top 10 Audit
Deficiencies, Journal of Accountancy 63 (2001).

that lack of professional skepticism by auditors regarding frauds of the early 2000s
generated academic literature on models of professional skepticism,125 a scale to measure
professional skepticism traits,126 and interventions designed to help increase professional
skepticism.127 Moreover, the commenter reported that an area of academic psychology
research asserts that skeptical behavior is a personality trait that may require a counterdispositional change in mindset.128 (The Board noted that this research does not
specifically study professional skepticism as a general principle or responsibility in
auditing.) In contrast, another commenter reported that academic research highlights the
merits of focusing on both obtaining and evaluating information as a pragmatic approach
in the exercise of professional skepticism.129
These comments suggest that efforts by firms, such as training and on-the-jobcoaching, may be needed regarding professional skepticism, but do not suggest that
professional skepticism as a general principle and responsibility of auditors is flawed. In
addition, the views shared by these commenters underscore the need for a well-defined
standard that sets forth the requirements of due professional care and professional
skepticism, which is discussed further below.

125
See, e.g., Mark W. Nelson, A Model and Literature Review of Professional Skepticism in
Auditing, 28 Auditing: A Journal of Practice & Theory 1 (2009).

See, e.g., R. Kathy Hurtt, Development of a Scale to Measure Professional Skepticism, 29
Auditing: A Journal of Practice & Theory 149 (2010).
See, e.g., Jessica Maree Cross, Robyn Moroney, and Soon-Yeow Phang, Is it All in the
Mind(Fulness)? An Exploratory Study Assessing the Impact of Mindfulness on Professional Skepticism, 37
Accounting Horizons 25 (2023).
See, e.g., Lewis R. Goldberg, The Structure of Phenotypic Personality Traits, 48
American Psychologist 26 (1993); Paul E. Bebbington, Orla McBride, Craig Steel, Elizabeth Kuipers,
Mirjana Radovanovic, Traolach Brugha, Rachel Jenkins, Howard I. Meltzer, and Daniel Freeman, The
Structure of Paranoia in the General Population, 202 The British Journal of Psychiatry 419 (2013); and
Ryan Hamilton, Kathleen D. Vohs, Anne-Laure Sellier, and Tom Meyvis, Being of Two Minds: Switching
Mindsets Exhausts Self-Regulatory Resources, 115 Organizational Behavior and Human Decision
Processes 13 (2011).
See, e.g., Jonathan H. Grenier, Encouraging Professional Skepticism in the Industry
Specialization Era, 142 Journal of Business Ethics 241 (2017) and Noel Harding and Ken T. Trotman, The
Effect of Partner Communications of Fraud Likelihood and Skeptical Orientation on Auditors' Professional
Skepticism, 36 Auditing: A Journal of Practice & Theory 111 (2017).
As noted in the proposal, research also offers insights on the appropriate and
expected levels of assurance for investors and other users of financial statements.130 One
accounting firm referenced a literature review that notes the audit expectation gap has
existed for many years and describes it as a phenomenon in which the expectations of
beneficiaries of audited financial statements exceed what auditors can reasonably be
expected to accomplish.131 Early research on the audit expectation gap concludes that the
majority of investors prefer absolute assurance that financial statements are free of
material misstatement, in contrast to the profession's standard that an audit should
provide reasonable assurance.132 Similarly, a more recent multi-country study finds that
survey respondents appear to expect much more than reasonable assurance from auditors
in order to prevent fraud and company failure.133
The Board believes this cross-section of research, either noted in the proposal or
by commenters, aligns with the Board's decision to maintain the core general principles
and responsibilities of the foundational standards. The synthesis research supports
professional skepticism as foundational to the performance of effective audits. Likewise,
the research on audit assurance supports the principle of reasonable assurance as an
appropriate level of assurance based on the underlying benefits and costs of an audit
engagement.134 As explained above, absolute assurance is not attainable because of the
nature of audit evidence and the characteristics of fraud. As described above, AS 1000
clarifies the general principles and responsibilities without substantially modifying the
general principles and responsibilities. Moreover, the Board does not anticipate that the

See PCAOB Rel. No. 2023-001, at 39.

See Reiner Quick, The Audit Expectation Gap: A Review of the Academic Literature, 94
Maandblad voor Accountancy en Bedrijfseconomie 5 (2020).
See, e.g., Marc J. Epstein and Marshall A. Geiger, Investor Views of Audit Assurance:
Recent Evidence of the Expectation Gap, 177 Journal of Accountancy 60, 64 (1994).
See Association of Chartered Certified Accountants, Closing the Expectation Gap in
Audit (May 2019) ("ACCA Report").
134

See, e.g., Ernest L. Hicks, Materiality, 2 Journal of Accounting Research 158 (1964).

final standard and related amendments will markedly influence the current audit
expectation gap since the Board preserved the core concepts while making marginal
adjustments to reaffirm the auditor's obligation to protect investors.
c.

Clarity of the foundational standards

As discussed in the proposal, some current features of the foundational standards
do not support the most efficient use of the standards.135 The general principles and
responsibilities are currently spread across four standards, which were not developed
originally as a cohesive whole. Their current organization continues to reflect their origin
as separate requirements that were not drafted to be read together. In addition, the
foundational standards contain language that was used in the AICPA's former standards
but is outdated and inconsistent for audits conducted today under the standards of the
PCAOB. This could undermine users' understanding of the general responsibilities of the
auditor for audits conducted in accordance with PCAOB standards. The foundational
standards also do not conform to the structure of Board-issued standards, which may
hinder an auditor's navigation of the requirements. Finally, the foundational standards do
not reflect developments in the auditing environment since their adoption in 2003,
including the PCAOB's adoption of standards and rules, such as standards on audit
documentation and engagement supervision, and this lack of consistency or alignment
may draw attention away from the general principles and responsibilities.
Overall, these current features of the foundational standards may reduce efficient
use of the standards by requiring more time and attention than necessary to read,
understand, and apply the standards and may lead to inconsistent application, potential
misinterpretation, and ineffective regulatory intervention. Clarity of auditing standards
requires effective communication through features such as relevant language, consistency

See PCAOB Rel. No. 2023-001, at 40.

with Board-issued standards and rules, and well-organized presentation, which appear
throughout PCAOB and SEC rulemaking initiatives.
Several firms and a firm-related group acknowledged that modernization efforts
to streamline and clarify the foundational standards will enhance users' awareness and
understanding of the auditor's responsibilities.
(1)

Characteristics of modernized auditing standards

Academic research identifies three characteristics of effective disclosure
documents that align well with the features of modernized auditing standards:
simplicity,136 salience,137 and standardization.138 Simplicity can be achieved with an
auditing standard that eliminates language that is outdated and inconsistent. Salience can
be achieved with an auditing standard that emphasizes requirements while including
explanations in the Board's release rather than the rule text and that incorporates the latest
developments in the auditing environment, including the adoption of Board-issued
standards and rules. Standardization can be achieved with an auditing standard that is
well-organized, with general principles and responsibilities presented in a single standard
that is structured similar to other standards.
In addition, the Board is aware of other regulatory initiatives that emphasize clear,
well-organized writing as characteristics of effective communication with stakeholders.
Two examples of other regulatory initiatives are the SEC Plain English Disclosure rule139

See, e.g., R.E. Nisbett and L. Ross, Human Inference: Strategies and Shortcomings of
Social Judgment (1980) (finding that individuals have limited cognitive resources to absorb and process
information).
137
See, e.g., Daniel Kahneman, Thinking, Fast and Slow (2013) (suggesting that individuals
who focus their limited cognitive resources on a subset of information are able to give more weight to the
subset when making decisions).
138
See, e.g., Jeffrey R. Kling, Sendhil Mullainathan, Eldar Shafir, Lee C. Vermeulen, and
Marian V. Wrobel, Comparison Friction: Experimental Evidence from Medicare Drug Plans, 127 The
Quarterly Journal of Economics 199 (2012) (finding that standardized information better enables
individuals to assess tradeoffs and make coherent, rational decisions).
Plain English Disclosure, SEC Rel. No. 33-7497 (Oct. 1, 1998).

for issuers' prospectuses, and the Plain Writing Act of 2010140 for government
communications with the public. The purpose of the Plain English Disclosure rule was to
make financial and business information available to investors in a form they could read
and understand, and the rule includes specific guidance for clear, concise language.141
The purpose of the Plain Writing Act was to improve the effectiveness and accountability
of federal agencies to the public by promoting clear communication that the public can
understand and use, and the statute defines plain writing as writing that is clear, concise,
and well-organized, and that follows other best practices appropriate to the subject and
the intended audience.142 While neither the Plain English Disclosure rule nor the Plain
Writing Act imposes obligations on the PCAOB, their overall objective to promote
effective communication for efficiency of stakeholders' understanding is aligned with the
objectives of and approach to the Board's modernization of the foundational standards.
The Board did not receive comments that provided additional information
regarding characteristics of modernized auditing standards.
(2)

Useability of modernized auditing standards

As summarized above, the Board continues to believe that auditors generally
understand their responsibilities under the foundational standards. Nonetheless, there
could be certain circumstances where some auditors' understanding of the general
principles and responsibilities is made more difficult than necessary by the current

Plain Writing Act of 2010, Public Law 111-274.

141
The economic effects of easy-to-read disclosure documents are quantified in research that
demonstrates a decrease in company valuation caused by a decrease in readability of disclosure documents.
See Byoung-Hyoun Hwang and Hugh Hokwang Kim, It Pays to Write Well, 124 Journal of Financial
Economics 373 (2017).
142
Using the Plain Writing Act as an exogenous event, research has found that the Plain
Writing Act resulted in improved readability of Form 10-Ks that caused the risk of stock price crash to fall.
See Shiyan Yin, Thanaset Chevapatrakul, and Kai Yao, The Causal Effect of Improved Readability of
Financial Reporting on Stock Price Crash Risk: Evidence from the Plain Writing Act of 2010, 216
Economics Letters (2022). Research has also found that while readability of disclosures improved
following the Plain English Disclosure rule, improved readability does not appear to influence more
experienced market participants, as measured by equity analysts' earnings forecasts. See Samuel B. Bonsall
IV, Andrew J. Leone, Brian P. Miller, and Kristina Rennekamp, A Plain English Measure of Financial
Reporting Readability, 63 Journal of Accounting and Economics 329 (2017).

language and organization of the foundational standards. New entrants, for example, may
need to spend more time navigating and distilling the extant general principles and
responsibilities than they would with more modernized language and organization. These
new entrants may include accounting students seeking to enter the auditing profession.
They may also include auditors who are experienced in applying other auditing or
attestation standards, such as those of the AICPA for entities other than issuers, but who
are seeking to perform an audit under PCAOB standards for the first time and who need
to confirm their responsibilities under PCAOB rules.
In addition, the current language and organization of the foundational standards
could impede investors' abilities to form accurate expectations about auditor
responsibilities under PCAOB standards. Investors form expectations from a number of
sources, including potentially the language of the standards themselves, but also from
third parties (e.g., media) who may write about PCAOB standards. Standards that are not
modernized could contribute to an expectation gap—in this case, a gap between what
investors expect from an audit and what auditing standards require.143 Such a gap could
in principle exist in either direction. Investors could be led to expect more than what an
audit is required to deliver, and thereby fail to price the risk appropriately. Alternatively,
investors could be led to expect less than what an audit is required to deliver, and thereby
fail to appreciate the important functions performed by auditors regarding reasonable
assurance.
Audit committees may also form inaccurate expectations about the content of
PCAOB standards if the standards are not modernized, via mechanisms similar to

Research finds evidence of a persistent gap between investors' expectations of an audit
and auditors' performance based on requirements under auditing standards. See, e.g., Klaus Ruhnke and
Martin Schmidt, The Audit Expectation Gap: Existence, Causes, and the Impact of Changes, 44
Accounting and Business Research 572, 592 (2014) (finding that the public has expectations of auditors'
responsibilities that do not exist under auditing standards, such as conducting a management audit) and
ACCA Report (finding that the persistence of the audit expectation gap reflects, in part, the fact that public
expectations of audits can grow in line with what auditors can accomplish).
investors. Given audit committee members' greater familiarity with auditing through their
position and responsibilities with the issuer and other relevant professional background,
the Board believes this is less likely to occur for audit committees than for investors.
However, the negative impact of an audit committee member failing to correctly
comprehend the auditor's general responsibilities under PCAOB standards could be more
severe, given the audit committee's role in supervising the audit and the auditor under
Sarbanes-Oxley for the benefit of investors.
The Board did not receive comments that provided additional information
regarding useability of modernized auditing standards.
ii.

Clarification of engagement partner responsibilities

One of the responsibilities of engagement partners is to review the work of
engagement team members. Any uncertainty under the standards may give engagement
partners an incentive, particularly under time pressures, to de-emphasize or omit the
review of workpapers. For example, the Board has found instances in which engagement
partners did not fulfill their responsibilities for review.144 However, engagement partner
review of workpapers is a critical step to promote audit quality. As noted above, firms
have varying policies and tools to facilitate the review required by the engagement
partner.
One commenter, an academic, referenced academic studies regarding engagement
partner impacts. The commenter reported that one study using data from Taiwan finds
evidence that suggests there is variation in the quality of engagement partners and that the
market responds to engagement partner quality.145 In addition, the commenter reported
that a group of studies finds evidence that engagement partners can negatively impact
144
See, e.g., In the Matter of Jin Tae Kim, PCAOB Rel. No. 105-2022-013 (Aug. 16, 2022)
and In the Matter of KPMG Assurance and Consulting Services LLP and Sagar Pravin Lakhani, PCAOB
Rel. No. 105-2022-033 (Dec. 6, 2022).
145
See, e.g., Daniel Aobdia, Chan-Jane Lin, and Reining Petacchi, Capital Market
Consequences of Audit Partner Quality, 90 The Accounting Review 2143 (2015).

audit quality when they do not follow auditing standards, such as by not promoting the
need for professional skepticism, ethical behavior, and continuing education.146 The
views shared by the commenter align with the Board's identification of the need to clarify
the engagement partner's responsibility to review certain audit documentation.
iii.

Accelerating the documentation completion date

The discussion above emphasizes the importance of adequate audit
documentation and the auditor's responsibilities for documentation under AS 1215, which
currently specifies an audit documentation completion date no more than 45 days after
the report release date. PCAOB standards require auditors to complete all necessary
auditing procedures, review those procedures, and obtain sufficient appropriate audit
evidence prior to the report release date. The extant requirements were established in part
because documentation that is added well after the completion of an audit is likely to be
of lesser quality than documentation produced contemporaneously when audit procedures
are performed because reconstructing and recalling activities related to performing audit
procedures long after the work was actually performed can be difficult.147 Separately,
significant advancements in electronic audit tools and the use of audit software have
occurred over the last two decades, which facilitate contemporaneous documentation and
more timely documentation completion. Based on these observations and some firms'
policies and practices summarized above, the current documentation completion date that
is 45 days after the report release date may provide more time than necessary to complete
and finalize the audit documentation.

See, e.g., Sean A. Dennis and Karla M. Johnstone, A Field Survey of Contemporary
Brainstorming Practices, 30 Accounting Horizons 449 (2016); Harding and Trotman, The Effect of Partner
111; Christopher Koch and Steven E. Salterio, The Effects of Auditor Affinity for Client and Perceived
Client Pressure on Auditor Proposed Adjustments, 92 The Accounting Review 117 (2017); and William F.
Messier, Jr. and Martin Schmidt, Offsetting Misstatements: The Effect of Misstatement Distribution,
Quantitative Materiality, and Client Pressure on Auditors' Judgments, 93 The Accounting Review 335
(2018).
147

See PCAOB Rel. No. 2004-006.

The PCAOB inspection process generally cannot begin until after the
documentation completion date. In cases where the PCAOB would like to initiate
inspections earlier, the 45-day period imposes an unnecessarily long lag before the
PCAOB can provide notice of inspection and obtain access to audit documentation,
which may prevent timely identification and resolution of audit deficiencies and delay
information on firm performance that is useful to investors for assessing attributes such
as audit quality or auditor effort.148
As discussed in the Board's proposal, the 45-day period also may pose a greater
risk of improper alteration of audit documentation because it provides a lengthy window
of opportunity between the release of the audit report and the completion of the audit
documentation.149
The Board did not receive comments that provided additional information
regarding the need to accelerate the documentation completion date.
2.

How the Changes Address the Need

i.

Modernization of the foundational standards

The changes modernize the foundational standards by reorganizing and
consolidating four standards, eliminating language that is no longer relevant, establishing
conformity with the structure of Board-issued standards, and harmonizing with PCAOB
standards and rules issued after the adoption of interim standards in 2003. These changes
are designed to make AS 1000 a more effective and efficiently used standard through a

See, e.g., Jagan Krishnan, Jayanthi Krishnan, and Hakjoon Song, PCAOB International
Inspections and Audit Quality, 92 The Accounting Review 143 (2017) (finding evidence consistent with
improvements in audit quality for foreign firms after PCAOB inspections) and Daniel Aobdia, The Impact
of the PCAOB Individual Engagement Inspection Process—Preliminary Evidence, 93 The Accounting
Review 53 (2018) (finding increases in auditor effort subsequent to deficiencies found through PCAOB
inspections). The Board notes that the results from these studies do not necessarily mean that PCAOB
inspections cause higher audit quality.
For examples of improper alteration of audit documentation within the 45-day archiving
period, see, e.g., In the Matter of Deloitte LLP, PCAOB Rel. No. 105-2021-014 (Sept. 29, 2021) and In the
Matter of Richard J. Bertuglia, CPA, SEC Rel. No. 84419 (Oct. 12, 2018).
well-organized presentation with relevant language that is more consistent with other
PCAOB standards.
ii.

Clarification of engagement partner responsibilities

The changes clarify engagement partner responsibilities by specifying the
engagement partner's due professional care responsibilities, explicitly stating that the
engagement partner has primary responsibility for the engagement that is not reduced
when assistance is provided by other engagement team members, and explicitly stating
that audit documentation must clearly demonstrate the person or persons who reviewed
the work and the date of such review. Clarification of the engagement partner's
responsibility to review certain audit documentation—including review of documentation
of significant findings or issues and review of documentation that is required to be
reviewed by the EQR—reaffirms the existing minimum level of responsibilities under
due professional care and promotes consistency across audits regarding an engagement
partner's oversight of the audit.
iii.

Accelerating the documentation completion date

The changes accelerate the documentation completion date by reducing the
maximum period for the auditor to assemble a complete and final set of audit
documentation from 45 days to 14 days after the report release date. This change enables
PCAOB inspections staff earlier access to audit documentation and reduces the window
of opportunity for improper alteration of audit documentation prior to the documentation
completion date.
C.

Economic Impacts
This section discusses the expected benefits and costs of the changes and potential

unintended consequences. The proposal described expected benefits and costs, resulting

in comments on each.150 Two commenters on the proposal noted that the changes will not
result in any significant additional costs to auditors or the companies they audit or in any
significant benefits to market participants. Some commenters suggested that the
economic analysis should more carefully consider potential costs or unintended
consequences associated with certain key provisions, as discussed further below. The
Board expects the economic impacts of AS 1000, including both benefits and costs, to be
relatively modest, especially for those firms that have already incorporated in practice an
engagement partner's responsibility for review and an accelerated documentation
completion date.
1.

Benefits

i.

Modernization of the foundational standards

To the extent that current features of the existing foundational standards reduce
efficient use of the standards, the changes will help enhance useability by making the
general principles and responsibilities of the auditor in conducting an audit in accordance
with the standards of the PCAOB easier to read, understand, and apply in practice.
For users trying to navigate and understand the general principles and
responsibilities, efficiency gains may be associated with each of the changes as follows:
•

The change to reorganize and consolidate the standards into a single standard
will reduce time and attention required to navigate several standards to locate
the general principles and ensure relevant requirements are met.

•

The changes to eliminate language that is no longer relevant will reduce time
and attention required to read, understand, and apply the standard by
facilitating a focus on core requirements of the standard.

See PCAOB Rel. No. 2023-001, at 45-50.

•

The changes to establish conformity with the structure of Board-issued
standards and make certain enhancements will help expedite navigation of the
requirements and ensure relevant requirements are met by: (i) providing more
uniformity among the PCAOB standards with an introduction and objectives
that emphasize the auditor's obligations; (ii) updating the articulations of the
concepts of due professional care, professional skepticism, professional
judgment, and reasonable assurance; (iii) clarifying auditor responsibilities by
expressing the requirements using Rule 3101 terms; and (iv) minimizing
explanatory material that is instead included in the release discussion.

•

The changes to harmonize with PCAOB standards and rules issued after
adoption of the interim standards in 2003 will reduce time and attention
required to read, understand, and apply the standard by drawing attention to:
(i) changes to auditing requirements through Board-issued standards; (ii)
clarifying the meaning of present fairly; (iii) an overarching objective for
audits of ICFR; and (iv) new rules issued by the Board.

Auditors learning the general principles and responsibilities for the first time may
do so more quickly and easily, thereby reducing the cost of training and potentially
facilitating the newer auditor's ability to perform PCAOB audits.
While the obligation of auditors would not change, reaffirming the auditor's
obligation to protect investors could serve as a reminder. Especially to the extent that
auditors do not currently fulfill this obligation, it may prompt auditors to reflect on a
sense of obligation to investors and the public that goes beyond their responsibilities to a
specific company under audit. At the margins, the emphasis on investor protection could
reinforce support for auditors in circumstances where they face decisions that may
require them to prioritize the interests of the public over their own interests or the
interests of the company under audit. Further, by highlighting the important role auditors

play in protecting investors, it could underscore the value of the auditing profession to
capital markets.
In addition, a modernized standard may enhance investors' and audit committees'
awareness and understanding of the auditor's responsibilities. Investors could be able to
more appropriately assess financial statement risk by better understanding the nature and
extent of auditor responsibilities. Audit committees' oversight of the auditor could be
enhanced, for example, if enhanced clarity of standards facilitates communication
between the audit committee and the auditor. Referencing academic research, one
commenter on the proposal explained that the role of the audit committee in ensuring the
quality of reported financial results requires improved and expanded dialogue between
the audit committee and the auditor.151
ii.

Clarification of engagement partner responsibilities

To the extent that engagement partners currently do not fulfill their
responsibilities for an appropriate review of the work of other engagement team members
as required under the existing standards,152 the clarification of engagement partner
responsibilities could improve auditor performance and audit quality by: (i) improving
the timeliness of the engagement partner's evaluation of significant findings and
judgments; (ii) enhancing the ability of the engagement partner to prevent or detect audit
deficiencies; and (iii) facilitating improvements in the quality of the work of other
engagement team members. As summarized above, one commenter referenced academic
studies that suggest engagement partners can negatively impact audit quality when they
do not follow auditing standards.
iii.

Accelerating the documentation completion date

151
See, e.g., Jeffrey Cohen, Lisa Milici Gaynor, Ganesh Krishnamoorthy, and Arnold M.
Wright, Auditor Communications with the Audit Committee and the Board of Directors: Policy
Recommendations and Opportunities for Future Research, 21 Accounting Horizons 165 (2007).
152
See, e.g., Jin Tae Kim, PCAOB Rel. No. 105-2022-013 and KPMG Assurance and
Consulting Services LLP, PCAOB Rel. No. 105-2022-033.

The amendment to accelerate the documentation completion date by reducing the
maximum period for the auditor to assemble a complete and final set of audit
documentation from 45 days to 14 days after the report release date will promote
contemporaneous documentation and more timely documentation completion.
Documentation that is produced contemporaneously when audit procedures are
performed and then completed soon thereafter is likely to provide a more accurate and
complete audit file for the engagement. The amendment will also support PCAOB efforts
to enhance audit quality via timelier identification and potential resolution of audit
deficiencies in cases where inspections are initiated earlier. In such cases, the amendment
could facilitate earlier issuance of inspection reports and their availability to investors. In
addition, the amendment could enhance auditor performance and audit quality for firms
that do not currently implement best practices, but will be more inclined to do so, by
proactively focusing on sequencing of work, allocation of resources, and other operating
practices.
The benefits associated with an accelerated documentation completion date are
likely to be greater for firms that currently make use of the entire 45-day period permitted
under current PCAOB standards due to current operating circumstances. These firms
would need to make more adjustments to their sequencing of work and allocation of
effort to meet the accelerated period. Thus, the concomitant benefits to audit quality
would therefore be greater. Based on firms' current archiving policies and practices
summarized above, the benefits associated with an accelerated documentation completion
date are likely to be higher for NAFs than for GNFs in cases where NAFs experience
operating efficiencies associated with changes in their sequencing of work, allocation of
resources, and other operating practices to comply with the documentation completion
date.

The benefits associated with an accelerated documentation completion date will
be lower for firms that already either: (i) have a policy that requires that documentation
be completed in 14 days or fewer or (ii) have a policy that is closer to or equal to the
current 45-day period but in practice complete their documentation shortly after releasing
the audit report. Specifically, the benefits to audit quality will be lower for these firms,
but the benefits to investors of earlier PCAOB inspections will still be achieved in cases
where inspections are initiated earlier.
Commenters on the proposal generally agreed that accelerating the documentation
completion date is feasible for firms and beneficial to investors. One commenter
suggested the ability to inspect audits sooner is a benefit that will not significantly
increase costs. Another commenter, an academic, suggested there could be market
benefits associated with earlier inspections if inspection reports are publicly available
earlier and the content of inspection reports is meaningful. The commenter referenced
several academic studies that demonstrate improvements in audit quality after PCAOB
inspections.153 The commenter reported that one study finds improvements in internal
control audits after PCAOB inspections154 and that another study finds increases in
auditor effort after PCAOB inspections find audit deficiencies.155 One commenter
questioned whether accelerating the documentation completion date would have any
meaningful impact on inspection timelines. Based on the acceleration of the
documentation completion date by 31 days, the Board noted that the most an inspection
report could be accelerated as a result of the accelerated documentation completion date
is 31 days.

See, e.g., Krishnan, et al., PCAOB International Inspections. The Board notes that the
results from these studies do not necessarily mean that PCAOB inspections cause higher audit quality.
See, e.g., Mark L. DeFond and Clive S. Lennox, Do PCAOB Inspections Improve the
Quality of Internal Control Audits? 55 Journal of Accounting Research 591 (2017).
155

See, e.g., Aobdia, The Impact of the PCAOB.

2.

Costs

i.

Modernization of the foundational standards

The primary costs of the modernization efforts reflected in the standard will be
one-time costs to firms for updating references within firm methodologies and related
guidance to reflect the final standard and related amendments. Larger firms that develop
their own methodologies will update references directly in those methodologies. Smaller
firms generally purchase methodologies from third-party vendors. The implementation
costs of the changes may be offset over time because a more logical and easy-to-readand-navigate standard could enable auditors to save time reading, understanding, and
applying the standard. Third parties that refer to PCAOB standards (e.g., in textbooks,
training, or review materials) will also need to update those materials.
To the extent that auditors are not taking into account PCAOB auditing
interpretations, as used in paragraph .15 and the related note of the standard, those firms
will also incur one-time and ongoing costs related to methodology and periodic training
for PCAOB auditing interpretations.
To the extent that auditors do not currently fulfill their obligation to protect
investors, auditors who face decisions that require them to prioritize the interests of the
public over their own interests or the interests of the company under audit may make
decisions that benefit the public at a potential cost to the auditor, such as alienating or
losing a company under audit. There is likely already a balance struck between fulfilling
the auditor's obligation to protect investors and the risk of alienating or losing a company
under audit. At the margins, the emphasis on investor protection may move the fulcrum
closer to the public interest.
The Board did not receive comments that provided additional information
regarding costs of modernization.
ii.

Clarification of engagement partner responsibilities

To the extent that engagement partners currently do not fulfill their
responsibilities for an appropriate review of the work of other engagement team members
as required under the existing standards,156 those firms may incur one-time costs to
update firm methodologies and ongoing costs related to fulfilling their responsibilities.
Larger firms that develop their own methodologies will update references directly in
those methodologies. Smaller firms generally purchase methodologies from third-party
vendors.
While the responsibilities of engagement partners would not change under the
new standard, the clarification for engagement partners to perform their duties with due
professional care, including their responsibility for performing an appropriate review of
the work of other engagement team members, could also impose incremental costs
related to fulfilling engagement partner responsibilities to the extent that engagement
partners are not currently fulfilling their responsibilities.
One commenter reported that research highlights the importance of and variation
in the direction, supervision, and review of audit work.157 The commenter further noted
that direction, supervision, and review are functions that are performed by auditors at
different levels of experience, not just engagement partners, and cited research that
highlights that the effectiveness of the functions can vary across hierarchical levels.158
While the Board acknowledged the commenter's points regarding the effectiveness of
functions performed by auditors at different levels of experience, the Board's analysis of

156
See, e.g., Jin Tae Kim, PCAOB Rel. No. 105-2022-013 and KPMG Assurance and
Consulting Services LLP, PCAOB Rel. No. 105-2022-033.

See, e.g., J.S. Rich, I. Solomon, and K.T. Trotman, The Audit Review Process: A
Characterization from the Persuasion Perspective, 22 Accounting, Organizations & Society 481 (1997)
and Mark Nelson and Hun-Tong Tan, Judgment and Decision Making Research in Auditing: A Task,
Person, and Interpersonal Interaction Perspective, 24 Auditing: A Journal of Practice & Theory 41 (2005).
See, e.g., Robert J. Ramsay, Senior/Manager Differences in Audit Workpaper Review
Performance, 32 Journal of Accounting Research 127 (1994) and Noel Harding and Ken T. Trotman,
Hierarchical Differences in Audit Workpaper Review Performance, 16 Contemporary Accounting Research
671 (1999).
costs here is limited to costs that are relevant to the economic impacts of the clarification
of engagement partner responsibilities.
iii.

Accelerating the documentation completion date

The amendment to accelerate the documentation completion date by reducing the
maximum period for the auditor to assemble a complete and final set of audit
documentation from 45 days to 14 days after the report release date will allow less time
to assemble the final set of workpapers after the audit report is released. However, the
PCAOB requirement to complete necessary auditing procedures, review those
procedures, and collect sufficient appropriate audit evidence prior to the report release
date could help mitigate costs to implement the amendment because the only activities
that remain are assembling a complete and final set of audit documentation. In addition,
the widespread use of electronic audit tools and audit software could help mitigate any
costs associated with the amendment.
The costs associated with an accelerated documentation completion date are likely
to be greater for firms that currently specify by policy an archiving period that is near or
equal to the maximum permitted under current AS 1215.15 and that currently take all or
nearly all of the full 45-day period to complete their archiving because of operating
circumstances that inhibit faster completion. These firms will have to invest additional
resources to enhance sequencing of their work, allocation of resources, and other
operating practices, or may have to enhance their audit documentation systems, or both,
in order to comply with the documentation completion date. Based on firms' current
archiving policies and practices summarized above, the costs associated with an
accelerated documentation completion date are likely to be higher for NAFs than for
GNFs in cases where NAFs currently use the entire 45-day period. However, the
extended effective date of the 14-day requirement for firms that issued audit reports with
respect to 100 or fewer issuers during the calendar year ending December 31, 2024, will

allow those firms more time to implement the revised requirement. By contrast, GNFs
that already require the completion of documentation within a 14-day period will likely
not incur substantial additional costs to comply with the revised requirement.
Electronic audit tools and audit software may facilitate compliance with the
requirement by automating, and thereby performing more quickly, certain processes. For
firms without electronic systems in place, costs associated with an accelerated
documentation completion date may include additional resources, such as in-house
personnel or capital investments in audit software, to help assemble a complete and final
set of audit documentation in the 14-day time period. PCAOB staff is aware that some
small NAFs still use paper-based systems. However, these firms generally perform
smaller, less complex audits, such that the firms do not have to mail audit workpapers
from multiple locations; therefore, even with a paper-based system, effective sequencing
of work, allocation of resources, and other operating practices could enable them to meet
the 14-day documentation completion date.
For firms with electronic audit tools and audit software in place, the earlier
documentation completion date should not change the functionality or cost of software,
which will facilitate a low-cost transition to the new archiving period. Some firms already
have policies that require documentation completion within 14 days of the report release
date, and some firms require audit documentation to be archive-ready upon completion of
interim procedures. These practices suggest that much of the process involved in
assembling a complete and final set of audit documentation, such as assembly, cleanup,
and retention, is substantially finished in advance of 45 days. Any firms that currently
have a policy or practice of completing audit documentation on or near the 45th day may
do so merely because the current standard allows 45 days, and thus will not incur costs to
meet the accelerated documentation completion date. Alternatively, any firms that
currently complete audit documentation on or near the 45th day because of operating

circumstances may incur costs associated with implementing best practices to effectively
sequence work, allocate resources, and incorporate other operating practices to comply
with the accelerated documentation completion date. In this case, the Board anticipates
that the costs will be offset over time by improvements in operating efficiencies to the
extent that operating circumstances are within the firm's control.
An accelerated documentation completion date may also impose costs on multifirm audits if electronic audit documentation systems are not integrated across firms.
GNFs are more likely than NAFs to perform multi-firm audits, but some NAFs do
perform multi-firm audits.159 If electronic systems are not integrated across firms, which
is more likely for NAFs, other auditors may need to transmit documentation to the lead
auditor to assemble the final set of workpapers. If electronic systems are integrated across
firms, the lead auditor may be able to seamlessly archive the work of other auditors.
Any costs associated with the requirements may be passed through to investors, or
costs may be internalized by firms. While competition in the audit market is characterized
by a combination of unique features,160 issuers that engage firms that pass through any
costs may switch firms if the benefits of switching justify the costs of switching.
Some commenters noted potential costs associated with accelerating the
documentation completion date. One commenter generally supported accelerating the
documentation completion date but noted that firms that use proprietary audit tools and
audit software will incur costs related to reprogramming and testing that could be
exacerbated for GNFs that are subject to differing jurisdictional requirements. The same
commenter also noted that accelerating the documentation completion date may
negatively impact smaller firms that do not utilize electronic audit tools to the extent that

See PCAOB Rel. No. 2022-002, at 26-52.

See, e.g., Joseph Gerakos and Chad Syverson, Competition in the Audit Market: Policy
Implications, 53 Journal of Accounting Research 725 (2015) (explaining that the audit market exhibits a set
of features that distinguish it from other markets for business services, including its role in capital market
transparency, mandated demand, and concentrated supply).
they are unable to comply with the requirement without considerable investments that
may not be economically feasible. Another commenter disagreed with accelerating the
date because of human capital factors and a complex auditing landscape. Another
commenter reported that academic research investigating the SEC's acceleration of Form
10-K filing deadlines in the 2000s suggests that accelerating the filing deadlines more
quickly than 15 days was costly to issuers regarding misstated financial statements.161
The commenter acknowledged the analogy may not align with the documentation
completion date but suggested that it is likely that firms currently requiring more than 29
days to complete audit documentation will likely incur non-trivial compliance costs.
The Board acknowledged that firms that use proprietary audit tools and audit
software will incur costs related to reprogramming and testing. While the Board also
acknowledged that some smaller firms may incur costs related to investments and some
firms may incur costs related to human capital or a complex auditing landscape, the
Board believes that most firms will incur incremental costs because they already use
electronic audit documentation systems. Likewise, the Board believes the contrast
between the SEC's acceleration of Form 10-K reporting deadlines and the Board's
acceleration of the documentation completion date is too stark to be a useful comparison
because the auditing standards require that all necessary auditing procedures, review of
those procedures, and collection of sufficient appropriate audit evidence be completed
prior to the report release date. Based on the broad support by commenters for
accelerating the documentation completion date and the existing requirement that all
necessary auditing procedures, review of those procedures, and collection of sufficient

See, e.g., Lisa Bryant-Kutcher, Emma Yan Peng, and David P. Weber, Regulating the
Timing of Disclosure: Insights from the Acceleration of 10-K Filing Deadlines, 32 Journal of Accounting
and Public Policy 475 (2013); Colleen M. Boland, Scott N. Bronson, and Chris E. Hogan, Accelerated
Filing Deadlines, Internal Controls, and Financial Statement Quality: The Case of Originating
Misstatements, 29 Accounting Horizons 551 (2015); and Khaled Alsabah, The 15-Day Debate and the
Value of Early Release of Information: Evidence from 10-K Filings, 42 Journal of Accounting and Public
Policy 1 (2023).
appropriate audit evidence be completed prior to the report release date, the Board
continues to believe that accelerating the documentation completion date by reducing the
maximum period for the auditor to assemble a complete and final set of audit
documentation from 45 days to 14 days after the report release date will provide better
protection for investors.
One commenter suggested that keeping the 35-day filing requirement for Form
AP in light of accelerating the documentation completion date could create technological
and process challenges for firms. Another commenter suggested that firms could incur
incremental costs such as process changes and administrative costs. In contrast, some
commenters said they would not have difficulty filing Form AP within 35 days of the
audit report being filed with the SEC. Two commenters suggested the time to file Form
AP should be consistent with the documentation completion date. The Board adopted the
14-day deadline for archiving audit documentation. The Board noted that firms, under AS
1215, can add information to the audit documentation after the documentation completion
date, if necessary, to record their compliance with Form AP requirements. Consequently,
the Board does not perceive any conflict or a necessity to modify either the 35-day Form
AP filing requirement or the proposed 14-day deadline for archiving audit
documentation.
3.

Potential Unintended Consequences

In addition to the benefits and costs discussed above, the final standard and
related amendments could have unintended economic consequences. The proposal
described potential unintended consequences, which commenters addressed in their
letters.162 This section discusses the potential unintended consequences the Board
considered as well as its consideration of such consequences in adopting the final

See PCAOB Rel. No. 2023-001, at 50-51.

standard and related amendments. The discussion also addresses, where applicable, any
mitigating or countervailing factors, including revisions to the proposed standard and
related amendments reflected in the final standard and related amendments the Board
adopted.
i.

Modernization of the foundational standards

The changes to modernize the foundational standards are not intended to impose
new requirements on auditors or substantially change the requirements of PCAOB
standards.
Commenters noted potential unintended consequences related to the removal of
explanatory language or the use of certain language in the proposed rule text or release
discussion. Several commenters suggested that removing explanatory language on
limitations of an audit may exacerbate the audit expectation gap and cause potential
confusion among auditors. Commenters also suggested that the use of certain proposed
language or certain proposed clarifications could result in potential confusion or
unintended expansion of auditors' responsibilities. For example, one commenter
suggested that requiring auditors to "keep in mind their role in protecting investors" could
encourage auditors to adopt an investor perspective when making judgments, which
research highlights may be detrimental to audit quality.163
These potential unintended consequences will be mitigated by changes to
language in the adopted rule text or release discussion. Throughout the rulemaking
process, the Board emphasized that eliminating restrictive provisions does not alter the
core principles and responsibilities that are transitioned from the current standards to AS
1000. The Board removed the reference to "keep in mind their role in protecting

See, e.g., Elizabeth C. Altiero, Yoon Ju Kang, and Mark E. Peecher, Motivated
Perspective Taking: Why Prompting Auditors to Take an Investor's Perspective Makes Them Treat
Identified Audit Differences as Less Material, 39 Contemporary Accounting Research 339 (2022) and Lei
Dong, Lei Wang, and Wen-Wen Chien, The Joint Effect of Supervisor Influence and Investor Perspective:
Unintended Consequences on Assessing Accounting Estimates, 37 Managerial Auditing Journal 151 (2022).
investors" from the final standard based on changes made to paragraph .01 of the final
standard. While the Board emphasized the investor protection obligation, the Board
clarified that the emphasis does not create any new legal requirements. The Board does
not believe that highlighting the auditor's existing obligation to protect investors will
widen any expectation gap or decrease audit quality. Instead, the Board's goal was to
heighten auditors' awareness and reinforce their existing obligation.
ii.

Clarification of engagement partner responsibilities

An unintended consequence of the amendment to clarify engagement partner
responsibilities would occur if, contrary to the Board's expectation, some firms whose
engagement partners currently do more than will be required to meet the minimum
requirement for engagement partner review, do less in the future to merely meet the
minimum requirement.164
This potential unintended consequence will be mitigated by the extent to which
engagement partners are aware that the engagement's performance is primarily their
responsibility. Furthermore, in contrast to a highly specific minimum threshold, the
Board noted that engagement partners under AS 1000 are bound to broad due
professional care responsibilities that are less likely to incentivize engagement partners to
merely meet a precise set of criteria without exceeding those criteria. In addition,
economic reasons that generate enhanced performance in the first place, such as partner
compensation, inspections, and litigation threat, help to mitigate this potential unintended
consequence.
One commenter suggested that the amendment to clarify engagement partner
responsibilities is reasonable and clear but could present unintended consequences by
limiting firms' abilities to attract and retain talent, which could potentially result in lower

164
See, e.g., Aobdia, The Impact of the PCAOB (finding that auditor effort declines
subsequent to PCAOB inspections of engagements that do not receive a Part I finding).

audit quality if people leave the profession. The Board anticipates that the amendments
related to engagement partner responsibilities will be unlikely to significantly affect
firms' abilities to attract or retain talent, or to disincentivize individuals from being
willing to serve as engagement partners because AS 1000 clarifies existing engagement
partner responsibilities. As outlined in the rest of the economic analysis, the Board
acknowledges that some marginal economic impacts could follow from these
amendments, but does not agree with the commenter that those effects will be dramatic.
iii.

Accelerating the documentation completion date

Unintended consequences of accelerating the documentation completion date
would occur if, contrary to the Board's expectation, (i) auditor time prior to the report
release date that was previously spent focusing on audit procedures is now spent on
assembling final workpapers or (ii) the archiving period results in higher costs that cause
firms with paper-based documentation systems to exit the audit market or to not enter the
audit market.
These potential unintended consequences will be mitigated by the current
requirement that all necessary auditing procedures, review of those procedures, and
collection of sufficient appropriate audit evidence be completed prior to the report release
date.165 Furthermore, if firms proactively sequence work, allocate resources, and
incorporate other operating efficiencies, they should not experience substantial
disruptions and should be able to handle the accelerated archiving deadline without major
problems.
One commenter acknowledged that accelerating the documentation completion
date may enhance audit quality overall but suggested that it could have an initial negative
impact on audit quality as a result of accelerating the archiving process into the period

See AS 1215.15.

when many SEC practice audit professionals need to start working on other issuer audit
engagements. Another commenter also acknowledged that accelerating the
documentation completion date may enhance audit quality and said it may allow PCAOB
inspections to begin sooner after completion of an audit, but issuers may have various
filing deadlines or require extensions that will necessitate the full attention of
professionals on those engagements. One commenter acknowledged that the acceleration
is beneficial and appropriate, but suggested that beginning the inspection process earlier
could be detrimental to audit quality because earlier inspections could cause auditors to
reallocate their time to the inspection process and away from audits of financial
statements. Consistent with the acknowledgements by these commenters, the Board
continues to believe that accelerating the documentation completion date will be
facilitated by the widespread use of electronic audit tools and audit software by most
firms, which could mitigate potential operating disruptions that firms experience as they
adjust to the accelerated date.
One commenter stressed the importance of the quality of audit documentation and
noted that technology interruptions or cybersecurity matters could impact the ability of a
firm to meet the accelerated deadline. However, the possibility of technology
interruptions or cybersecurity matters could impact a firm's ability to meet any deadline.
Another commenter reported that academic studies find there can be unintended
consequences of additional regulation, including new costs associated with extensive
audit documentation, auditors taking a "box-ticking" approach to extensive
documentation requirements, and reduced auditor retention.166 However, accelerating the
documentation completion date does not add any new documentation requirements.

See, e.g., Colleen M. Boland, Brian E. Daugherty, and Denise Dickins, Evidence of the
Relationship between PCAOB Inspection Outcomes and the Use of Structured Audit Technologies, 38
Auditing: A Journal of Practice & Theory 57 (2019) and Marion Brivot, Mélanie Roussy, and Maryse
Mayer, Conventions of Audit Quality: The Perspective of Public and Private Company Audit Partners, 37
Auditing: A Journal of Practice & Theory 51 (2018).
D.

Alternatives Considered
During the formulation of the proposal and adoption of the final standard and

related amendments, the Board considered a number of alternative approaches to the final
standard and related amendments the Board adopted, including those suggested by
commenters.
1.

Modernization of the Foundational Standards

The Board considered whether to update the foundational standards and keep
them as individual standards, but the Board believes that combining the general
principles and responsibilities into one standard is more logical and easier to navigate.
This approach is also consistent with the approaches of other standard setters. For
example, both the IAASB and the ASB address general responsibilities of the auditor in
one standard (see IAASB's ISA 200 and ASB's AU-C 200).
The Board also considered whether to incorporate the requirements of AS 2815
into AS 1000, but believes that it is more logical to incorporate the requirements of AS
2815 into AS 2810 because both standards address requirements for concluding audit
procedures. This approach also eliminates unnecessary cross-references between the two
standards and makes the auditor's responsibilities easier to locate. AS 1000 includes a
reference to AS 2810 for the auditor's responsibilities related to the evaluation of whether
the financial statements are presented fairly, in all material respects, in conformity with
the applicable financial reporting framework.
2.

Clarification of Engagement Partner Responsibilities

With respect to engagement partner responsibilities, the Board considered
retaining the language of AS 1010 that describes the use of judgment in the context of the
partner's responsibilities for supervision. However, the Board believes that leveraging the
requirements of AS 1201, a more recent standard, avoids potential confusion and aligns
the engagement partner's responsibilities with Board-issued standards. Other alternatives

to the amendments related to engagement partner responsibilities, including comments
received, were considered as discussed above.
3.

Accelerating the Documentation Completion Date

For the documentation completion date, the Board considered a length of time
between the current 45-day period and the 14-day period, such as 21 days or 30 days. The
Board believes that a shorter period of time may provide better protection for investors
than a longer period: it could permit acceleration of PCAOB inspections and provide the
strongest incentives for firms to implement operating efficiencies that may ultimately
improve audit quality. Thus, in principle, a shorter documentation completion date could
achieve more benefits than a longer period. The Board's assessment of existing firm
practice as described above led it to believe that 14 days is feasible for firms and that a
longer period could therefore be unnecessary and would erode the benefits that would
otherwise be achieved.
Investor-related groups suggested the documentation completion date should be
reduced to two days for all firms. The Board continues to believe 14 days is feasible for
all firms while not being too restrictive for firms that may require more time. Another
commenter asserted that the economic analysis did not adequately consider alternatives
other than 14 days and that the analysis did not offer any alternatives to begin inspections
earlier other than accelerating the documentation completion date. As noted above, the
Board considered a length of time between the current 45-day period and the 14-day
period. Moreover, the need to accelerate the documentation completion date is based on
other considerations in addition to cases where the PCAOB would like to initiate
inspections earlier. Another commenter asserted that firms' operating efficiencies are not
the purview of the PCAOB. However, the need for the amendment is not based on
operating efficiencies but may result in operating efficiencies that improve audit quality.

The Board also considered whether to specify different documentation completion
dates for different classes of firms, based on specific firm characteristics that may make
compliance with an accelerated documentation completion date especially challenging
because of some practical obstacle or because of expenses that are common to that class
of firms. For example, the Board considered specifying a longer documentation
completion date for NAFs than for GNFs. However, as noted above, the Board believes
that the 14-day period is a feasible period for all firms; the Board is not aware of any
practical obstacle or expenses that will make compliance with a 14-day period especially
challenging for all firms within a particular class. In contrast, a uniform and consistent
archiving period for all firms would facilitate implementation and compliance, especially
for audits that involve multiple firms that could be subject to different archiving periods.
Finally, having a unified archiving date will enable earlier PCAOB inspections across all
registered firms.167
SPECIAL CONSIDERATIONS FOR AUDITS OF EMERGING GROWTH
COMPANIES
Pursuant to Section 104 of the Jumpstart Our Business Startups ("JOBS") Act,
rules adopted by the Board subsequent to April 5, 2012, generally do not apply to the
audits of emerging growth companies ("EGCs"), as defined in Section 3(a)(80) of the
Exchange Act, unless the SEC "determines that the application of such additional
requirements is necessary or appropriate in the public interest, after considering the
protection of investors, and whether the action will promote efficiency, competition, and
capital formation."168 As a result of the JOBS Act, the rules and related amendments to
167
While the Board has not specified different documentation completion dates for different
classes of firms, the extended effective date of the 14-day requirement for firms that issued audit reports
with respect to 100 or fewer issuers during the calendar year ending December 31, 2024, will allow those
firms more time to implement the revised requirement.
168
See Pub. L. No. 112-106 (Apr. 5, 2012). Section 103(a)(3)(C) of Sarbanes-Oxley, as
added by Section 104 of the JOBS Act, also provides that any rules of the Board requiring (1) mandatory
audit firm rotation or (2) a supplement to the auditor's report in which the auditor would be required to
provide additional information about the audit and the financial statements of the issuer (auditor discussion

PCAOB standards that the Board adopts are generally subject to a separate determination
by the SEC regarding their applicability to audits of EGCs.169
To inform consideration of the application of auditing standards to audits of
EGCs, PCAOB staff prepares a white paper annually that provides general information
about characteristics of EGCs.170 As of the November 15, 2022 measurement date, there
were 3,031 companies171 that self-identified as EGCs and filed audited financial
statements with the SEC between May 16, 2021, and November 15, 2022, that included
an audit report signed by a firm.172
As discussed in the proposal, the economic impacts of the standard and related
amendments are generally applicable to audits of EGCs.173 The amendment to accelerate
the documentation completion date by reducing the maximum period for the auditor to
assemble a complete and final set of audit documentation from 45 days to 14 days could
impact the audits of EGCs more than the audits of non-EGCs to the extent that EGCs are
more likely than non-EGCs to be audited by NAFs.174 As discussed above, NAFs are
and analysis) shall not apply to an audit of an EGC. The new standard does not fall within either of these
two categories.
169
The Board provided this analysis of the impact on EGCs to assist the SEC in making the
determination required under Section 104 to the extent that the requirements apply to "the audit of any
emerging growth company" within the meaning of Section 104 of the JOBS Act.

See PCAOB, Characteristics of Emerging Growth Companies and Their Audit Firms at
November 15, 2022 (Feb. 20, 2024) ("EGC White Paper"), available at https://assets.pcaobus.org/pcaobdev/docs/default-source/economicandriskanalysis/projectsother/documents/white-paper-on-characteristicsof-emerging-growth-companies-as-of-nov-15-2022.pdf?sfvrsn=a8294f3_2.
The EGC White Paper uses a lagging 18-month window to identify companies as
EGCs. Please refer to the "Current Methodology" section in the EGC White Paper for details. Using an 18month window enables staff to analyze the characteristics of a fuller population in the EGC White Paper
but may tend to result in a larger number of EGCs being included for purposes of the present EGC analysis
than would alternative methodologies. For example, an estimate using a lagging 12-month window would
exclude some EGCs that are delinquent in making periodic filings. An estimate as of the measurement date
would exclude EGCs that have terminated their registration or that have exceeded the eligibility or time
limits.
See EGC White Paper 17. Based on staff analysis as of the Nov. 15, 2022 measurement
date, 86 percent of the 263 firms that issued audit reports for EGCs performed audits for both EGC and
non-EGC issuers while 14 percent performed issuer audits only for EGCs.
173

See PCAOB Rel. No. 2023-001, at 52-54.

PCAOB staff analysis indicates that, compared to exchange-listed non-EGCs, exchangelisted EGCs are approximately 2.6 times as likely to be audited by an NAF (source: EGC White Paper and
Standard & Poor's).
expected to require more changes than GNFs in their sequencing of work, allocation of
resources, and other operating practices to comply with the accelerated documentation
completion date. Therefore, all else equal, both the benefits and costs of the amendments,
including the amendment to accelerate the documentation completion date, may be higher
for EGC audits than for non-EGC audits.
While both the benefits and costs of the amendment to accelerate the
documentation completion date may be higher for EGC audits, the costs may be
mitigated based on certain characteristics of EGCs. For example, to the extent that EGCs
are smaller than non-EGCs, EGC audits may be less complex, which potentially
facilitates expeditious assembly of the final workpapers.175 In addition, to the extent that
EGCs are audited by firms that issued audit reports with respect to 100 or fewer issuers
during the calendar year ending December 31, 2024, the extended effective date of the
amendment to accelerate the documentation completion date will allow those firms more
time to implement the accelerated documentation completion date.176 Moreover, as EGCs
are not large accelerated filers ("LAFs"), the SEC Form 10-K filing deadline for EGCs is
either 75 days after the fiscal year end for accelerated filers or 90 days for nonaccelerated filers. This provides firms with an additional 15 days for accelerated filers or
30 days for non-accelerated filers, as compared to the time period for LAFs, to assemble
the required final workpapers during a period that may be proportionately less busy.
The amendment to accelerate the documentation completion date could improve
efficiency and capital formation for EGCs to the extent that the amendment reduces
uncertainty about the reliability of an EGC's financial statements via enhanced audit
quality. Investors who are uncertain about the reliability of an EGC's financial statements
175
See EGC White Paper, Figure 9 and Figure 12 (indicating that exchange-listed EGCs
have lower market capitalization and revenue than exchange-listed non-EGCs).

See EGC White Paper 22. Based on staff analysis as of the Nov. 15, 2022 measurement
date, U.S. firms audited 2,548 EGCs, of which 817 were audited by firms that issued audit reports for 100
or fewer issuer audit clients.
may require a larger risk premium that reduces the efficient allocation of capital or
increases the cost of capital. Thus, any reduction of uncertainty via enhanced audit
quality, including from firms' implementation of operating efficiencies, could improve
the efficiency of capital allocation, lower the cost of capital, and enhance capital
formation for those EGCs.
The amendment to accelerate the documentation completion date could also
impact competition in an EGC product market if any indirect costs to audited companies
disproportionately affect EGCs relative to their competitors. For example, if EGCs are
forced to raise prices in order to remain viable but their non-EGC competitors are not
forced to raise prices, this may divert market share toward their non-EGC competitors.
This could increase competition in markets where EGCs have a dominant market share
and decrease competition in markets where EGCs have a less than dominant market
share. However, the incentives for firms to pass costs onto EGCs may also be limited by
competition for audits.
The proposal sought comments on the applicability of the proposed requirements
to audits of EGCs. Several commenters agreed that the requirements of AS 1000 should
apply to the audits of EGCs. One commenter suggested that the audits of EGCs should be
subject to stricter requirements because non-accelerated filers have a higher incidence of
restatements and because small capitalization issuers have a higher proportion of equity
owned by individual investors but less coverage by sell-side analysts.177 However, the
Board continues to believe the same standard and related amendments should apply to
audits of EGCs and non-EGCs to avoid the potential for confusion that could accompany
differences within firms' policies and procedures with respect to audits of EGCs and nonEGCs.

See, e.g., Audit Analytics, 2021 Financial Restatements: A Twenty-One Year Review
(May 2022) and Garnet Roach, Only Small Caps See Minority of Shares Held by Institutions, Research
Shows, IR Magazine (Jan. 18, 2022).
Accordingly, and for the reasons explained above, the Board has requested that
the Commission determine that it is necessary or appropriate in the public interest, after
considering the protection of investors and whether the action will promote efficiency,
competition, and capital formation, to apply the standard and related amendments to
audits of EGCs.
III.

Date of Effectiveness of the Proposed Rules and Timing for Commission

Action
Within 45 days of the date of publication of this notice in the Federal Register or
within such longer period (i) as the Commission may designate up to 90 days of such date
if it finds such longer period to be appropriate and publishes its reasons for so finding or
(ii) as to which the Board consents, the Commission will:
(A) By order approve or disapprove such proposed rules; or
(B) Institute proceedings to determine whether the proposed rules should be
disapproved.
IV.

Solicitation of Comments
Interested persons are invited to submit written data, views and arguments

concerning the foregoing, including whether the proposed rules are consistent with the
requirements of Title I of the Act. Comments may be submitted by any of the following
methods:
Electronic comments:
•

Use the Commission's internet comment form
(https://www.sec.gov/rules/pcaob); or

•

Send an e-mail to rule-comments@sec.gov. Please include PCAOB-2024-01
on the subject line.

Paper comments:

•

Send paper comments in triplicate to Vanessa A. Countryman, Secretary,
Securities and Exchange Commission, 100 F Street, NE, Washington, DC
20549-1090.

All submissions should refer to PCAOB-2024-01. This file number should be
included on the subject line if e-mail is used. To help the Commission process and review
your comments more efficiently, please use only one method. The Commission will post
all comments on the Commission's internet website (https://www.sec.gov/rules/pcaob).
Copies of the submission, all subsequent amendments, all written statements with respect
to the proposed rules that are filed with the Commission, and all written communications
relating to the proposed rules between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552,
will be available for website viewing and printing in the Commission's Public Reference
Room, 100 F Street, NE, Washington, DC 20549, on official business days between the
hours of 10 a.m. and 3 p.m. Copies of such filing will also be available for inspection and
copying at the principal office of the PCAOB. Do not include personal identifiable
information in submissions; you should submit only information that you wish to make
available publicly. We may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All submissions should refer to
PCAOB-2024-01 and should be submitted on or before [INSERT DATE 21 DAYS
AFTER DATE OF PUBLICATION IN THE FEDERAL REGISTER].
For the Commission, by the Office of the Chief Accountant.178

Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-12691 Filed: 6/10/2024 8:45 am; Publication Date: 6/11/2024]

17 CFR 200.30-11(b)(1) and (3).