Investor Bulletin - Opportunity to Comment on Proposed Updates to PCAOB Standards Addressing the Use of Data Analytics by Auditors

July 28, 2023

The Public Company Accounting Oversight Board’s (PCAOB or “the Board”) Office of the Investor Advocate is alerting investors to the opportunity to comment on the PCAOB’s Proposed Amendments Related to Aspects of Designing and Performing Audit Procedures That Involve Technology-Assisted Analysis of Information in Electronic Form.

This document represents the views of the PCAOB Office of the Investor Advocate and not necessarily those of other PCAOB staff or the Board. It is not a rule, policy, or statement of the Board.

On June 26, 2023, the Board issued a proposal for public comment to revise certain auditing standards to specifically address the growing use of data analysis in the audit. Investors have pointed to the use of data analytics as an area of concern and one that updated PCAOB standards could benefit.

  • Read the full proposal here.

The nature and extent of data analytics and other information technology have expanded over the last decade. Some companies maintain large volumes of electronic information, which may be used to prepare the company’s financial statements. Increasingly, auditors use data analytics tools to perform certain audit procedures, including to analyze patterns in transaction data, compare company data against other sources of information, recalculate figures, or for other uses.

Auditors apply data analytics for many purposes, including when assessing and responding to risks of material misstatements in the financial statements. 

The proposal would address the expanded use of data analytics by auditors by updating PCAOB standards concerning identifying and assessing risks of material misstatement and obtaining audit evidence in response to the identified risks. For example, the proposal would:

  • Clarify that when an auditor uses data analytics for more than one purpose, the use(s) should be designed and performed to satisfy each purpose;
  • Emphasize the importance of carefully selecting the data set for analysis to ensure it is relevant and reliable to achieve the objectives of the auditor’s analysis; and
  • Remind auditors of the importance of general and specific application controls over electronic information maintained in a company’s information system that is used in the preparation of the company’s financial statements or in the auditor’s procedures.

The proposal is part of an ongoing and active PCAOB project on the use of technology by auditors. The project may result in or inform additional proposals.

How to Comment on the Proposal

The Board is seeking public comment – including from investors – on the proposal. Comments are due by August 28, 2023. Comments can be sent by email (to [email protected]), by paper mail, or through the Board’s website.

The Office of the Investor Advocate encourages investors as well as others to submit comments on this proposal.