IMA FRC comment letter response to PCAOB proposed quality control standard
Tuesday, January 3, 2023
The IMA® (Institute of Management Accountants) Financial Reporting Committee (FRC or Committee) issued a comment letter in response to the Public Company Accounting Oversight Board (PCAOB or Board) Release No. 2022-006, A Firm’s System of Quality Control (Proposal or Release).
In its Release, the PCAOB states that the proposed standard would result in significant improvements to the quality control systems of U.S. registered public accounting firms and support consistent performance of high-quality audits and other engagements. The PCAOB further states that the Proposal reflects an integrated, risk-based standard that is applicable by firms of varying sizes and complexities.
In its response, the FRC expresses support for the general approach and principal direction of the proposal; however, it offers several caveats and specific comments:
- The PCAOB released this extensive Proposal, which includes 93 separate questions for respondents, at the time of seasonal holidays and year-end reporting. These circumstances raise concerns that smaller firms may have had inadequate time to respond meaningfully to the points.
- Although the Proposal articulates a principles-based risk assessment process, the actual structure and wording may lead to a checklist approach in practice.
- The quality control system envisioned by the Proposal would benefit from the following features:
- Sign-off by a firm’s principal executive officer.
- Addition of independent person(s) to a firm’s oversight function.
- Filing of an annual Form QC with the PCAOB.
- A requirement, based on PCAOB standards, that firms design and implement controls over unauthorized access to technology and data.