Investor Bulletin: Audit Committee and Independent Auditor Dialogue

Oct. 25, 2024

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

The staff of the Public Company Accounting Oversight Board (PCAOB) from time to time issues publications to highlight timely information to keep stakeholders apprised of the PCAOB's activities and observations.

OIAD is providing this bulletin to encourage investors to reference these informative publications. In particular, this Investor Bulletin highlights resources that investors may consider as they engage with audit committees concerning the audit committees’ dialogues with their independent auditors.

As highlighted in the “Spotlight: 2023 Conversations With Audit Committee Chairs,” effective and informed audit committees can be a force for elevating audit quality that benefits investors and the capital markets. Investors may consider outreach to audit committees to discuss the audit committees’ audit oversight.

Considering the Audit

The “Spotlight: Audit Committee Resource” highlights that as part of audit committees’ audit oversight responsibilities, it is important that audit committees engage in effective dialogue with their independent auditors and ask relevant questions throughout the audit, such as:

  • Auditing and accounting risks: How has the auditor considered the economic environment, including recent significant economic, accounting, or other developments, in its determination of whether identified risks are significant risks?
  • Audit firm independence: What are the audit firm’s policies or procedures for identifying, evaluating, and addressing any threats to independence, in fact or appearance?
  • Critical audit matters: How has the auditor considered whether there is any audit matter that involved challenging, subjective, or complex auditor judgment? What preliminary determinations were made that ultimately did not result in the reporting of a critical audit matter?

Considering PCAOB Inspection Findings

Inspecting registered public accounting firms’ audits and quality control systems for compliance with applicable laws, rules, and standards is one of the most important tools the PCAOB has to protect investors. PCAOB inspectors continue to observe a high level of audit deficiencies overall. In light of inspection findings, the PCAOB’s staff has included suggested questions in a recent update that audit committees may want to consider in discussions among themselves and with their independent auditors, such as:

  • Has our audit engagement been inspected, and, if so, would you share the results?
  • If the engagement was selected, were there any audit areas that required significant discussions with the PCAOB that did not result in a comment form?
  • Has the engagement partner been inspected on other engagements? If so, what were the results of that inspection?

Investors may find the questions above and the information in the “Spotlight: Staff Priorities for 2024 Inspections and Interactions With Audit Committees” helpful to consider as reference points for outreach to audit committees regarding their interactions with their independent auditors. Overall, investors may consider inquiring of audit committees whether they are engaging in such discussions in their oversight of independent auditors, and if they are not, to encourage audit committees to do so.

Other Resources