PCAOB Proposes Replacement of Standard Related to Substantive Analytical Procedures

The PCAOB has released a proposed auditing standard that would supersede its current auditing standard (AS 2305) on the auditor’s use of substantive analytical procedures — that is, procedures in which an entity’s “recorded amount . . . or an amount derived from the recorded amount” is compared with “an expectation of that amount developed by the auditor to determine whether there is a misstatement.” The new guidance would “strengthen and clarify the auditor’s responsibilities when designing and performing substantive analytical procedures, increasing the likelihood that the auditor will obtain relevant and reliable audit evidence — ultimately improving overall audit quality and leaving investors better protected.”

In addition to replacing AS 2305, the proposal would make related amendments to the PCAOB’s standards on (1) audit evidence and (2) the auditor’s responses to the risks of material misstatement.

Comments on the proposed auditing standard are due by August 12, 2024. For more information, see the press release — as well as the statements by PCAOB Chair Erica Williams and board members Christina Ho, Kara Stein, George Botic, and Anthony Thompson — on the PCAOB’s Web site.