US SEC approves new audit quality benchmarks over Republican objections Reuters

(Reuters) – Wall Street’s top regulator on Monday signed off on new accounting standards set by a watchdog as part of an effort to address concerns about the prevalence of poor quality audits.

The five-member U.S. Securities and Exchange Commission voted 3-2, with Republican members opposing what they said was a rushed drafting process and unnecessary burdens that could fall on audit firms more small.

MAKING

The US Public Company Accounting Oversight Board (PCAOB), which Congress created in the wake of the Enron-era accounting scandals and whose rules and standards require SEC approval, has taken steps to tighten accounting rules and standards this year.

KEY QUOTE

“The PCAOB found that 46 percent — nearly half — of the audit engagements it reviewed in 2023 did not obtain sufficient and appropriate audit evidence,” said SEC Chairman Gary Gensler.

CONTEXT

The new standard, which the PCAOB adopted in May, will require registered accounting firms to identify, manage and continuously monitor audit quality control risks and will hold audit firm management accountable if the firm fails to meet the requirements.

However, Republican members of the five-member U.S. Securities and Exchange Commission opposed the measure, saying it was rushed and would create unnecessary burdens for smaller audit firms.

These include the requirement to design compliant quality control systems even when not currently performing audits subject to PCAOB standards.

WHAT’S NEXT

The new standard is due to enter into force in December next year.