Audit Committes Cannot Ignore the PCAOB

Although the PCAOB has no authority to regulate audit committees, the Board and its staff interact with audit committees in a variety of ways that may not be readily apparent. At a Practising Law Institute seminar in Chicago today Mary M. Sjoquist, special counsel to the Board, outlined areas in which the Board and audit committees interact.

For example, the audit committee should ensure that the company’s outside auditors are registered with the PCAOB. Why? Because the filing of financial statements audited by an unregistered firm would constitute a violation of SEC rules and may cause the Commission to deem the financial statements to be unaudited. In addition, as part of reviewing audit engagements, the Board examines auditor-audit committee relationships. Sometimes, the inspection staff interview audit committee chairs to assess the accounting firm’s relationship and communications with the audit committee. This is not that onerous because the interviews are usually conducted by telephone. Inspectors are not trying to assess the audit committee, assured special counsel, but instead they are trying to get a handle on the auditor—audit committee relationship.