Currently, two PCAOB standards—AS 1201, Supervision of the Audit Engagement, and AS 1205, Part of the Audit Performed by Other Independent Auditors—take different approaches to how the lead auditor supervises, or uses, the work of other auditors.

The PCAOB is in the process of making adjustments to its initial 2016 proposal, which raised objections from the business community. One of the controversial elements of that proposal, which covers numerous topics, addressed what the lead auditor must do to ensure that the secondary auditor(s) complied with PCAOB and Securities & Exchange Commission (SEC) rules.

Business groups have weighed in on the changes suggested by the PCAOB in September 2017, and they are unmoved by the modifications. The Center for Audit Quality wrote, “To require the lead auditor to take on the responsibility for assessing another firm’s processes for compliance with Regulatory Independence/Ethics Requirements would be difficult, if not impossible to execute due to practical challenges.”

Tom Quaadman, executive vice president at the Center for Capital Markets Competitiveness (CCMC), U.S. Chamber of Commerce, expressed his unhappiness with the rewrite, saying, “The CCMC continues to have concerns about whether the revisions now being considered by the PCAOB strike the right balance on the responsibilities of the lead auditor.”

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