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In light of the ever-increasing use of technology-based tools by auditors and preparers, the Public Company Accounting Oversight Board (PCAOB) on May 12 released an update on its Data and Technology Research Project and inquiry into the need to amend oversight board standards and other regulatory actions. The project had been initiated based on the acknowledgement that current standards don’t explicitly encourage the use of technology-based tools, nor do they indicate when their use might be appropriate or highlight related associated risks. As a result of its review, the PCAOB has stated that principles-based auditing standards are likely to be adapted to accommodate the increased use of technology-based tools in the future, but current standards don’t preclude or detract from a firm’s ability to use such tools in a way that could enhance audit quality.
In the new release, the oversight board analyzed the impact of technology-based tools within the context of two standards: AS 2110, Identifying and Assessing Risks of Material Misstatement, and AS 1105, Audit Evidence, as well as some general best practices on firm policies and procedures on the use of such tools, including:
Regarding AS 2110, Identifying and Assessing Risks of Material Misstatement, the PCAOB released findings related to four areas where technology-based tools are being used and how compliance with current standards is being accomplished:
The PCAOB also identified four areas related to AS 1105, Audit Evidence, where technology-based tools are being used, and how compliance with current standards is being accomplished:
In addition to the findings above, the PCAOB will continue to conduct research and engage in outreach activities focusing on the use of technology-based tools in auditing and financial reporting, how those tools are being used to identify RMM and how requirements in PCAOB standards apply, as well as collaborating with regulators and standard setters. The PCAOB is also considering the impact of technology use by firms on engagements as part of the project on potential revisions to PCAOB quality control standards.
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