IMA FRC comment letter to PCAOB on noncompliance with laws and regulations

March 18, 2024

IMA’s FRC issued a comment letter to share its additional views on Public Company Accounting Oversight Board (PCAOB) Release No. 2023-003, Amendments to PCAOB Auditing Standards related to a Company’s Noncompliance with Laws and Regulations (Proposal) as part of the comment period reopening in line with the March 6, 2024 public virtual roundtable and the roundtable briefing paper that included supplemental questions and topics.

In its letter, the FRC noted that in light of the wide range of concerns shared across stakeholder groups, it strongly encourages the PCAOB to repropose Release No. 2023-003 to ensure a balanced consideration of the implications of the Proposal as drafted. Many significant issues have been raised about the lack of clarity around the objective of the Proposal, the implied expansion of the scope of financial statement audits and related internal controls over financial reporting, the impact on privileged communication, the role
of the auditors and attorneys versus the role of management, and the potential costs to comply with the Proposal.

In the FRC’s opinion, the magnitude of the impact of these concerns cannot be appropriately addressed through redeliberations and it believes a reproposal is required to ensure appropriate due process over any final amendments. Further, a comprehensive economic analysis should be performed to ensure the costs of implementation and ongoing compliance with the Proposal are adequately assessed prior to any final amendments.