Compliance Week Quotes Claudius Modesti on PCAOB Inspections
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For its article “Audit committees advised: be cautious if PCAOB calls,” Compliance Week quoted Akin Gump partner Claudius Modesti on announced plans by the Public Company Accounting Oversight Board to have more interaction and dialogue with audit committee members in its inspections process.
Modesti, who served as the PCAOB’s first Director of the Division of Enforcement, noted that this is not an entirely new development, as PCAOB has reached to audit committees in the past, though “They may not have done it consistently or systematically with all of its inspections,” he said.
He noted that the Board has, for a long time, considered audit committees as important stakeholders in the financial reporting process, with PCAOB having many topics it might want to discuss with committees, among them, auditor independence; cybersecurity; challenges around multilocation audits, domestically and overseas; audit quality indicators; and emerging technologies. He did note that he would expect board inspectors to “keep it at an appropriately high level of discourse.”
Modesti said that, while there is always some risk in interacting with a regulator, audit committees should not be deterred from engaging in dialogue, adding, “It’s a voluntary exercise…I don’t think there will be undue pressure to deliver any and all answers on the spot.”
In that vein, he noted that audit committees can take time to prepare for these conversations: “Getting advice of counsel is probably a good idea for audit committees as they engage in this type of process.”
