The IIA “Deeply Concerned” By New PCAOB Proposal; Internal Auditors Caught in CPA Firms’ Regulatory Crossfire
LAKE MARY, Fla. (December 22, 2022) – The Institute of Internal Auditors (IIA) – the internal audit profession's leader in standards, certifications, education, research, and technical guidance worldwide – today expressed serious concerns regarding an internal auditor provision in the Public Company Accounting Oversight Board’s (PCAOB) recently published proposed standard, entitled: “The Auditor’s Use of Confirmation, and Other Proposed Amendments to PCAOB Standards.”
The PCAOB’s proposed standard unfairly and inaccurately places internal auditors at the center of an effort to regulate issues with CPA firms. The proposed standard attempts to address those issues by prohibiting external auditors from working with internal auditors to provide direct assistance in the confirmation process, but that solution fails to recognize that both internal and external auditors report directly to the same governing body - an organization’s Audit Committee of the Board of Directors. Of particular concern is the potential misinterpretation and implication of internal audit wrongdoing in Section III(I) of the proposed standard, which states: “Involving internal auditors or other company employees in these activities [confirmation process] would create a risk that information exchanged between the auditor and the confirming party is intercepted and altered.”
“I am deeply concerned by the potential precedent the PCAOB’s proposed standard may set regarding the work of internal auditors,” said IIA President and CEO Anthony Pugliese, CIA, CPA, CGMA, CITP. “The internal audit profession is grounded in providing audit committees with objective assurance, independent from management, in accordance with internationally recognized internal auditing standards. The PCAOB’s proposed standard could have the unintended consequence of implying that internal auditors would intentionally ‘intercept’ and ‘alter’ information. Like external auditors, internal auditors have an obligation to exercise due care in the handling of all information.”
Internal auditors are responsible for providing audit committees with objective assurance, independent from management, on matters related to risk management, internal controls, and corporate governance, in accordance with the International Standards for the Professional Practice of Internal Auditing. Because internal auditors and external auditors have the same independent reporting relationship to the Audit Committee, it is common for external auditors to rely on work performed by internal auditors and/or for internal auditors to directly assist external auditors in the performance of certain duties.
The IIA is presently examining the full impact of the PCAOB’s proposed standard and intends to submit a formal response in the coming weeks.
“Despite our concerns,” added Pugliese, “The IIA is looking forward to working constructively with the PCAOB to address the underlying concerns and come up with an acceptable solution to strengthen PCAOB standards.”
Click here to read the proposed standard.
About The Institute of Internal Auditors
The Institute of Internal Auditors (IIA) is a nonprofit international professional association that serves more than 218,000 global members and has awarded 180,000 Certified Internal Auditor (CIA) certifications worldwide. Established in 1941, The IIA is recognized throughout the world as the internal audit profession's leader in standards, certification, education, research, and technical guidance. For more information, visit theiia.org.
Contact:
Chris Almonte
The Institute of Internal Auditors
Chris.Almonte@theiia.org
(407) 937-1349