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2023/05/11

The International Organization of Securities Commissions (IOSCO) welcomes the initiative of the International Audit and Assurance Standards Board (IAASB) to seek early participation and broad engagement in the negotiation of new international sustainability assurance standards

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On May 2nd, the United States Public Company Accounting Oversight Board (PCAOB) announced that in order to enhance the transparency of its audit reports, it will provide more relevant, reliable, and useful information to investors and other stakeholders to the public through a series of improvement measures such as increasing the independence of auditors.

PCAOB Chairman Erica Y. Williams stated, "We are committed to making our inspection reports as valuable as possible to investors, audit committees, and others. Today, we have taken an important step forward in advancing this goal by paying greater attention to violations of independence and other behaviors. These enhancements will provide relevant information requested by investors and support the improvement of overall audit quality

The enhanced inspection report will include:
A new section of the report focuses on independence violations: a new independence section (i.e. Section C of Part One) will be added to discuss non-compliance with PCAOB rules related to maintaining independence, as well as possible non-compliance with the independence rules of the United States Securities and Exchange Commission.
More information related to fraud procedures and the identification and assessment of significant misstatement risks: The report will be expanded to include considerations of fraud in AS 2401 financial statement audits and deficiencies related to AS 2110's identification and assessment of significant misstatement risks.
More comments: The report will provide additional comments on certain situations in Section A of Part One, such as whether the audit is the first audit of the issuer by the firm, or whether the firm has identified significant risks in areas where PCAOB inspectors have identified defects, including fraud.
New chart: For the firms inspected annually, the report will include charts to clearly display the tenure of the firms and project partners.
George R. Botic, head of PCAOB's registration and inspection department, said, "These improvements will further improve audit quality and make our inspection reports more useful to the public. We are particularly pleased to provide more information on auditor independence, which is crucial for audit quality and the foundation of audit objectivity, credibility, and integrity


The Accounting Oversight Board of Listed Companies in the United States has added new chapters on auditor independence to enhance the transparency of inspection reports


On May 2nd, the United States Public Company Accounting Oversight Board (PCAOB) announced that in order to enhance the transparency of its audit reports, it will provide more relevant, reliable, and useful information to investors and other stakeholders to the public through a series of improvement measures such as increasing the independence of auditors.
PCAOB Chairman Erica Y. Williams stated, "We are committed to making our inspection reports as valuable as possible to investors, audit committees, and others. Today, we have taken an important step forward in advancing this goal by paying greater attention to violations of independence and other behaviors. These enhancements will provide relevant information requested by investors and support the improvement of overall audit quality
The enhanced inspection report will include:

A new section of the report focuses on independence violations: a new independence section (i.e. Section C of Part One) will be added to discuss non-compliance with PCAOB rules related to maintaining independence, as well as possible non-compliance with the independence rules of the United States Securities and Exchange Commission.

More information related to fraud procedures and the identification and assessment of significant misstatement risks: The report will be expanded to include considerations of fraud in AS 2401 financial statement audits and deficiencies related to AS 2110's identification and assessment of significant misstatement risks.

More comments: The report will provide additional comments on certain situations in Section A of Part One, such as whether the audit is the first audit of the issuer by the firm, or whether the firm has identified significant risks in areas where PCAOB inspectors have identified defects, including fraud.

New chart: For the firms inspected annually, the report will include charts to clearly display the tenure of the firms and project partners.

George R. Botic, head of PCAOB's registration and inspection department, said, "These improvements will further improve audit quality and make our inspection reports more useful to the public. We are particularly pleased to provide more information on auditor independence, which is crucial for audit quality and the foundation of audit objectivity, credibility, and integrity.


The new ICAEW center aims to provide clear information for good professional judgment

According to ICAEW's May 9th news, professional judgment has been the cornerstone of discussions around auditing and corporate governance reform over the past three years. In its feedback statement on restoring trust in auditing and corporate governance, the UK Department of Commerce and Trade encouraged the Financial Reporting Committee (FRC) to develop an agreed professional judgment framework. Afterwards, FRC released its career judgment framework in June 2022, providing guidance for making career judgments and providing examples for its application.

However, effective professional judgment is more subtle than what guidance documents can provide. Compared to other aspects of auditing and assurance, factors such as company culture play a greater role in the effectiveness of professional judgment.

There are relatively few sources of guidance to help professionals develop their skills. Through its Career Judgment Center, ICAEW has compiled a series of resources aimed at helping everyone consider how to handle difficult judgments.

John Boulton, Policy Director of ICAEW, said, "Professional judgment is the core of becoming a professional. This is not only a trait that certified public accountants should exhibit in various situations, but also a skill that can be continuously improved throughout their career

Several scholars and senior figures in the accounting industry have expressed opinions on how to provide high-quality professional judgment. Sir Andrew Likierman, former dean and current professor of accounting management practice at London Business School, consulted Sir Donald Brydon's investigation into audit quality and effectiveness. He proposed six elements of professional judgment that he believes auditors and accountants should follow, including: trust; relevant knowledge and experience; detachment; choice; and delivery.

Brydon believes in his UK commentary on "Quality and Effectiveness of Auditing" that professional judgment is both the foundation of a highly respected auditing profession and a way to readjust audit focus to make it more proportionate.

Professor Atul K Shah, a visiting lecturer in finance and accounting at the School of Policy and Global Affairs at City College London, believes that more emphasis should be placed on personal ethics and ethics in professional judgment.

The ICAEW Code of Ethics for Accountants (based on the IESBA International Code of Ethics for Accountants) repeatedly mentions situations where ICAEW members need or need to exercise professional judgment.

John Boulton pointed out that "ICAEW's Career Judgment Center will gather a series of resources related to career judgment to help timely determine when critical judgments may need to be made and help everyone develop career judgment skills. 

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