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Given the increasing complexity of business processes and transactions, and the heightened risk of material misstatements in financial statements, the use of specialists has become imperative both for auditors and their respective clients. FEE welcomes the initiative to address the need for improvements in this area, and has provided answers to the questions included in the Consultation Paper in an Appendix to this letter.
FEE would like to highlight that it would be helpful if the revised PCAOB standard could remain on the same line as the IAASB standard ISA 620, Using the Work of an Auditor’s Experts. In general, the right balance needs to be found between applying principles and requiring auditors to undertake certain detailed procedures. The priority should be that both standards remain consistent with each other. FEE has been consistently advocating for the alignment of auditing standards globally to the maximum extent possible, which enhances both the quality of audits and the acceptance of audit work globally.
FEE notes that some of the potential requirements identified in the Consultation Paper reflect the application material included in ISA 620, Using the Work of an Auditor’s Expert. To the extent that the PCAOB’s inspections programme reveals weaknesses in this area, we would suggest the Board undertake a root cause analysis, as new or stricter requirements will not address misunderstanding or misinterpretation of the PCAOB’s current standards.
As per the consultation, in order to use the opinion and work of a specialist engaged or employed by the client, the auditor may need to engage their own specialists. FEE believes that a risk-based approach is essential in this context and is concerned about unintended consequences of the proposed PCAOB approach: if auditors are required to treat the information prepared by these specialists as if prepared by the audited company, companies may stop engaging their own specialists and just rely upon the numbers that the auditor’s specialist produces which, for instance for independence reasons, cannot be the intension.