The 2019 Staff Inspections Outlook published by\nthe Public Company Accounting Oversight Board indicates that there are some\ninteresting changes on the horizon. Of particular interest is that the PCAOB\nwill allow audit committee chairs of companies who may be audited to\nparticipate in discussions with inspection staff. <\/p>\n\n\n\n
While the PCAOB\u2019s intent is to provide a more\nthorough explanation of the audit, and perhaps create more transparency, the\nreality may be a bit more complex than that. Companies should take into account\nthe potential impacts of the discussions between the audit committee chairs and\nthe inspection staff. <\/p>\n\n\n\n
The major concern is that the PCAOB will gain\ninsight into the audit committee process as well as the audit committee\nobtaining information about PCAOB processes. Some lawyers indicate that a\ndialogue between the two entities is likely only appropriate if the audit is\ncomplete and there were no issues found. <\/p>\n\n\n\n
If there are issues found, then having that\ndialogue occur could potentially cast either party in a negative light. It\ncould potentially influence enforcement activity. <\/p>\n\n\n\n
The reality is that while the PCAOB may only\nhave the authority to act against auditors, it is also their practice to share\nresults of the audit with a variety of government agencies who can enforce\nactions against the issuer. <\/p>\n\n\n\n
In order to avoid unexpected interactions with the PCAOB, an issuer should require a timely letter that not only explains the intention of their investigations. Additionally, in the event that discussions between the audit committee and the inspection staff take place, the company should have an attorney on hand. <\/p>\n\n\n\n
Specifically, only the attorney should have\ninteraction with the PCAOB so that those discussions stay within a certain\nboundary. <\/p>\n\n\n\n
It\u2019s common for the PCAOB to make updates and changes\nin regards to the specifics of their processes. While there may not be any ill\nintent behind said changes, it\u2019s important for companies to consider the bigger\npicture when participating in certain discussions with the PCAOB. An attorney\nwill simply ensure that those discussions are kept within a certain scope and\nthat there are no long-term ramifications that could influence the company\nlong-term. <\/p>\n\n\n\n