Of course, it’s not just the SEC that will feel the impact of a new administration. Even quasi-regulators like the PCAOB are impacted. Hence, the PCAOB’s recent decision to put its pending rulemaking that would broaden the scope of auditor responsibilities for audit client noncompliance with laws and regulations – known as NOCLAR – on hold, as noted in this “Accounting Today” article.
Just a few days earlier, it was reported that the PCAOB would consider adopting its proposal despite the change in administration – but that seems to have changed. Even if the PCAOB did adopt its proposal, the SEC would have to approve it. And it’s unlikely the SEC would move forward in doing that until the SEC chair changes hands to the GOP.
The PCAOB’s NOCLAR proposal has been controversial for companies, particularly audit committees, as more than 200 comment letters were submitted criticizing the proposal. For example, see this comment letter organized by the Center for Audit Quality and signed by 170 people – many of whom are audit committee members – which notes they are concerned that:
- The proposed scope is too broad.
- The proposal does not sufficiently take into account a company’s existing compliance function and the shared responsibility of the board of directors, the audit committee, the chief compliance officer and the general counsel.
- Auditors are not lawyers and, as a result, the proposed amendments would expand the auditor’s role to include knowledge and expertise outside their core competencies.
- The proposal would substantially increase the cost of the audit without a commensurate benefit.
Authored by
Broc Romanek