The Public Company Accounting Oversight Board introduced two pieces of guidance to help auditing firms apply its new quality control standard.
The Securities and Exchange Commission approved the PCAOB's QC standard in September. QC 1000, A Firm's System of Quality Control, will require all registered public accounting firms to identify specific risks to their practice and design a quality control system that can safeguard against those risks. The standard will require an annual evaluation of firms' QC systems and reporting to the PCAOB. It takes effect on Dec. 15, 2025.
To help firms adjust to the upcoming requirements, the PCAOB posted two guidance documents Tuesday. QC 1000 Staff Guidance explains how all firms registered with the PCAOB, including those that don't audit issuers or SEC-registered brokers and dealers, are affected by QC 1000, but not all requirements of QC 1000 will apply to every firm. The publication offers an overview of the various requirements of QC 1000 along with staff guidance for firms about how to comply with the standard.
QC 1000 emphasizes accountability, firm culture, the "tone at the top," and firm governance through requirements for specified roles within and responsibilities for the QC system, including at the highest levels of the firm; quality objectives that link compensation to quality; and, for the largest firms, the requirement of an independent perspective on firm governance, the publication points out.
The other publication is AS 2901 Staff Guidance. In connection with the adoption of the new QC 1000 standard, the PCAOB has expanded the auditor's responsibility to respond to deficiencies on completed engagements under an amended and retitled AS 2901, Responding to Engagement Deficiencies After Issuance of the Auditor's Report. In addition to an overview of these changes, the publication includes insights from the PCAOB staff on the scope and applicability of the new requirements, along with information on responding to engagement deficiencies and documentation. AS 2901 requires firms to take action to respond to all engagement deficiencies identified on completed engagements unless it's probable that the auditor's report is not being relied on, the PCAOB noted.
