Post-Implementation Review of AS 2501, Auditing Accounting Estimates, Including Fair Value Measurements; Amendments to Auditing Standards for Auditor’s Use of the Work of Specialists
The PCAOB has released an interim analysis report and two accompanying staff white papers examining the initial impact of new requirements for auditing accounting estimates, including fair value measurements (“Estimates Requirements”) and the auditor’s use of the work of specialists (“Specialists Requirements”). Given the identical effective dates and concurrent implementation efforts for these standards, our analysis considered the effects of both standards at once.
- Interim Analysis Report: Evidence on the Initial Impact of New Requirements for Auditing Accounting Estimates and the Auditor’s Use of the Work of Specialists (December 2022)
- Staff White Paper: Stakeholder Outreach on the Initial Implementation of Estimates and Specialists Audit Requirements (December 2022)
- Staff White Paper: Econometric Analysis on the Initial Implementation of the New Specialists Requirements (December 2022)
To inform the analysis, the staff of the PCAOB’s Office of Economic and Risk Analysis surveyed audit firms; interviewed audit engagement partners, audit committee chairs, and preparers; analyzed the comment letters received through a public request for comment on initial experiences with implementing the new requirements; and conducted large-sample statistical analysis. Staff also evaluated whether evidence gathered on initial implementation of the Estimates Requirements and Specialists Requirements is suggestive of significant benefits, costs, or unintended consequences.
Key findings from the staff’s analyses include the following:
- About one-third of the audit firms in the staff’s survey reported that the new requirements improved auditing practices. Other audit firms reporting that the effects of the new standard were limited and generally asserted that their prior policies and methodologies were already largely aligned with the new requirements.
- Audit firms had significant variation in the amount of time they spent to support implementation of the new requirements and in training firm personnel for these new requirements.
- At the audit engagement level, almost all audit firms and audit engagement partners reported that the new requirements did not result in significant increases in audit hours or audit fees.
- Statistical analysis of PCAOB inspections data finds evidence of changes in specialist usage following implementation of the Specialists Requirements.
- The staff has not found evidence of significant unintended consequences or implementation challenges associated with the new requirements.
The Board will continue to monitor the implementation of the new requirements and their impact on the quality of audit services, as well as on audit committees, preparers, and audit firms.
Further information on the implementation of the new requirements for auditing accounting estimates and using the work of specialists as audit evidence is available in the Standards section of this website.
The PCAOB will continue to monitor the implementation of the new Estimates Requirements and Specialists Requirements. Because some of the effects of the new requirements may take several years to fully manifest or stabilize, the PCAOB will also continue to evaluate the timeline for developing any more comprehensive post-implementation review. Potential future analyses would further evaluate the benefits and costs of these new requirements, including any unintended consequences, so as to understand the overall effect of the requirements on users of financial statements, auditors, and public companies.