LAKE MARY, FLA (Feb 27, 2023) – The Institute of Internal Auditors (IIA) – the internal audit profession's leader in standards, certification, education, research, and technical guidance worldwide – recently conducted a review of the public comments made in response to the Public Company Accounting Oversight Board’s (PCAOB) recently issued proposed auditing standard, “The Auditor’s Use of Confirmation, and Other Proposed Amendments to PCAOB Standards.”
At the close of the comment period (February 20), 19 organizations and individuals had submitted letters taking exception to an anti-internal auditor provision in the proposal, which contains comments from the PCAOB that have been deemed ‘false and inflammatory.’
The chorus of organizations joining The IIA to voice their pushback against the PCAOB’s unfounded allegations that internal auditors may “intercept” or “alter” audit confirmations include The Wendy’s Company, Association of College and University Auditors, National Association of State Boards of Accountancy (NASBA), and Grant Thornton, LLP.
“While the anti-internal auditor language and unfounded allegations in the PCAOB’s proposed standard are unfortunate and uncalled for, The IIA is pleased to see the profession and many of our key stakeholders rally together against it,” said Mat Young, IIA Vice President, Global Advocacy, Policy, and Government Affairs. “Since the new internal audit restrictions in standard were proposed, The IIA has been vocal in our stance that the PCAOB’s proposal is a solution in search of a problem and would only create regulatory mixed messages while jeopardizing the valuable and ongoing collaborations between external audit firms and internal auditors.”
The quotations below, taken directly from the respective public comment letters, provide a snapshot of the comments made to the PCAOB in support of the internal audit profession:
Gunther Plosch, Chief Financial Officer of The Wendy’s Company
Melissa Clawson, Chief Audit Executive of The Wendy’s Company
As the Chief Financial Officer of The Wendy’s Company with over 30 years in the financial industry, I can personally attest to the integrity and professionalism of internal auditors […] It is essential that Federal regulators, such as the PCAOB, acknowledge the importance of internal audit and utilize the profession as a resource in strengthening audit practices. […]
As the Chief Audit Executive for Wendy’s with over 15 years of Internal Audit work, I disagree with the assertion that we would alter or intercept audit evidence as you stated in your proposal. I hold my team to our professional standards issued by the Institute of Internal Auditors and annually require all of us to read and sign our code of conduct statements, including needing to maintain independence.
Richard N. Reisig, CPA, Chair of NASBA
Ken L. Bishop, President & CEO of NASBA
We do not support the proposed prohibition. The PCAOB did not provide an evidence-based rationale for this prohibition. The prohibition could potentially undermine the valid and helpful relationship that exists between external and internal audit functions and the very positive audit work that can be accomplished when auditors work with internal audit in the context of AS 2605, Consideration of the Internal Audit Function.
Melissa Hall, CPA, CFE, CCEP, President of the Association of College and University Auditors
The wholesale characterization of internal auditors as people who would “manipulate,” inappropriately “intercept,” or “alter” documentation to the false benefit of their employers demonstrates a surprising – and frankly disappointing – lack of comprehension by the PCAOB of the internal audit profession. […]
To be clear, ACUA’s concerns and those of the internal audit profession as a whole are not about confirmations. The concerns are that the PCAOB’s proposal and comments impugn the integrity of the entire internal audit profession and its 230,000 members, including ACUA’s.
Anthony Pugliese, CIA, CPA, CGMA, CITP, President & CEO of The Institute of Internal Auditors
According to the PCAOB’s language, internal auditors are presumptively never to be trusted. Such a position is offensive to the long-standing history of collaboration and cooperation between external auditors and internal audit functions and unnecessarily casts suspicion on the integrity of all internal auditors.
Background on the PCAOB Proposed Standard
- On December 22, 2022, the PCAOB published, for public comment, a proposed auditing standard entitled: “The Auditor’s Use of Confirmation, and Other Proposed Amendments to PCAOB Standards.”
- The proposed standard, in relevant part, bars external auditors from utilizing an internal audit function to provide direct assistance in the confirmation process (selecting, sending and receiving confirmations).
- The IIA’s public comment letter urged the PCAOB to treat internal auditors “without prejudice,” and maintain AS 2605 (Consideration of the Internal Audit Function) as the regulatory standard governing the relationship between external auditors and internal auditors.
About The Institute of Internal Auditors
The Institute of Internal Auditors (IIA) is an international professional association that serves more than 230,000 global members and has awarded more than 185,000 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, certifications, education, research, and technical guidance. For more information, visit theiia.org.