The Public Company Accounting Oversight Board is forming a new advisory body called the Inspections Modernization Council.
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The IMC’s goal is to provide the PCAOB chairman, board and staff with outside expertise on the board’s oversight activities. As such, the board is looking for experts with capital markets expertise and knowledge of the PCAOB’s inspection program to participate. The
“Modernization of PCAOB inspections has the potential to bring improved audit quality and other significant benefits to investors and other stakeholders,” Demetrios Logothetis, chairman of the PCAOB, said in a statement. “The Inspections Modernization Council will help us shape the future of PCAOB inspections, and we invite individuals of the highest integrity to join us in this effort.”
The IMC is authorized to exist for 18 months from the date of the approval of the prospective members, unless the board dissolves it sooner, or extends its duration, under its own discretion. The work is expected to be concentrated between the selection of its members and Sept. 30. This includes in-person meetings in Washington, D.C. in July and August. For the remainder of the term, the IMC is expected to provide ad hoc advice.
The IMC will include up to 12 members. While the members may be employed or affiliated with other organizations, they will serve in their personal capacities and not as representatives of their employers. Applicants may include investors, audit committee members, financial executives at public companies, academics, technologists, other regulators and practitioners from accounting firms. IMC members will not receive compensation.
Richard Chambers, senior advisor of risk and audit at Optro and former president and CEO of the Institute of Internal Auditors, expects the PCAOB under its current leadership to be looking at audit quality much differently than it has in recent years.
“I think they’re going to be more outcome focused when it comes to audit quality rather than tactical,” Chambers said. “Focusing exclusively on engagements, they’re going to be looking at the controls the firms have in place at a firm level.”
“I think you’re going to see, in all likelihood, the PCAOB shifting more toward a focus on firmwide quality control systems rather than solely focusing on the isolated engagement deficiencies through the inspections,” he continued. “That doesn’t mean that inspections are going away by any means. It means that the inspections will be a way the firms can demonstrate that they have those firmwide controls in place.”
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