Statement by PCAOB Board Member Robert Brown, Jr. on The Role of Investors in the Revisions to PCAOB Quality Control Standards
The Harvard Law School Forum on Corporate Governance and Financial Regulation 2020-01-24
Today [Dec. 17, 2019], the Board votes on a Concept Release concerning standards of quality control (QC) for firms that audit public companies and SEC-registered broker-dealers. The importance of this step cannot be overstated. We depend upon, and benefit from, quality control in most things that we do. We need quality control over the food we eat, the medicines we take, the automobiles we drive, and the planes we board. As we all know, when quality control fails, the result could be disastrous.
The same is true with respect to financial reporting. Reliable financial reporting is critical to advancing the public interest and ensuring confidence in our capital markets. Trusted, reliable financial reporting depends on rigorous, independent auditing, which in turn relies on an effective QC system.
The critical importance of an effective QC system to audit quality makes these standards uniquely important to investors and the public. Quality control relates to a firm’s audit practice as a whole and is intended to, among other things, ensure that audits are appropriately staffed by highly trained personnel who are capable of assessing relevant risks and have the necessary resources to conduct audits. Quality control does more than provide a set of upfront assurances. Firms monitor the results to ensure audit quality, sometimes in real time.