View in browser


	ISSUE 1 \| JANUARY 2025


	At-A-Glance The Public Accounting Oversight Board (PCAOB) recently issued new rules describing substantial specific information that auditors will need to provide concerning the operation of their audit practices on a firmwide and engagement level basis. The data is expected to better enable the PCAOB to assess how well firms are run, and how effective firms are at performing audits. Not surprisingly, audit firms are not happy about what is considered an excessive and costly overreach, and, along with the American Institute of CPA’s, are speaking out against the measures. The new Presidential administration is expected to weigh in as well, potentially reducing or eliminating the new rules. This edition of the Audit & Accounting Alert highlights the new rules which would begin to come into effect for years ending later in 2028. Also, our Worldwide Update covers news from organizations across the globe.


	Gerald Herter - Editor


	PCAOB Updates Reporting Framework and Firms’ Metrics Disclosures Changes designed to improve transparency, consistency and oversight


	Major new rules proposed by the Public Accounting Oversight Board (PCAOB) will require disclosure of significant proprietary information from audit firms, if approved by the SEC. As expected, the auditors are working hard attempting to stop or limit the perceived damage that their firms could incur. The required information, which pertains to firm-wide as well as engagement level metrics data, falls into the following eight areas: Partner and manager involvement – “Hours worked by senior professionals relative to more junior staff across the firm’s large accelerated and accelerated filer engagements and on the specific engagement.” Workload – “For senior professionals who incurred hours on large accelerated or including time attributable to all engagements, administrative tasks, training, and all other matters.” Training hours for audit personnel – “Average annual training hours for partners, managers, and staff of the firm, combined, across the firm and on the engagement.” Experience of audit personnel – “Average number of years worked at a public accounting firm (whether or not PCAOB-registered) by senior professionals across the firm and on the engagement.” Industry experience – “Average years of career experience of senior professionals in key industries audited by the firm at the firm level and the audited company’s primary industry at the engagement level.” Retention of audit personnel (firm-level only) – “Continuity of senior professionals (through departures, reassignments, etc.) across the firm.” Allocation of audit hours – “Percentage of hours incurred prior to and following an issuer’s year-end across the firm’s large accelerated and accelerated filer engagements and on the specific engagement.” Restatement history (firm-level only) - “Restatements of financial statements and management reports on internal control over financial reporting (“ICFR”) that were audited by the firm over the past three years.” Separate rules call for updating firm annual and special reports to the PCAOB regarding these further areas: Financial information – report “additional fee information” and, for the largest firms, “confidentially submit financial statements;” Governance information – report “additional information regarding their leadership, legal structure, ownership, and other governance information, including reporting on certain key Quality Control operational and oversight roles,” Network relationships – “a more detailed public description…of any network arrangement to which a registered firm is subject, including describing the network’s structure, the registered entity’s access to resources such as audit methodologies and training, and whether the firm shares information with the network regarding its audits, including whether the firm is subject to inspection by the network.” Special reporting – “confidential special reporting requirement for events material to a firm’s organization, operations, liquidity or financial resources, such that they affect the provision of audit services.” Cybersecurity – “prompt confidential reporting of significant cybersecurity events …and periodic public…reporting of a brief description of the firm’s policies and procedures, if any, to identify and manage cybersecurity risks;” and Updated description of QC policies and procedures – “a new form that will require any firm …to submit an updated statement of the firm’s quality control policies and procedures…” Besides the potential harm that could result from divulging this information, firms would be saddled with an inordinate amount of time necessary to amass the required material. If approved, the rules would be effective for large firms beginning in years ending on September 30, 2028, and later. Smaller firms would have an additional year to prepare. The new US Presidential administration will bring new leadership to the PCAOB and SEC. With this changeover, the new rules can be expected to be reduced or eliminated. Further details can be found at Notice of Filing of Proposed Rules on Firm and Engagement Metrics and Related Amendments to PCAOB Standards and 2024-013-firm-reporting.pdf (https://www.sec.gov/files/rules/pcaob/2024/34-101724.pdf) and (https://assets.pcaobus.org/pcaob-dev/docs/default-source/rulemaking/docket-055/2024-013-firm-reporting.pdf?sfvrsn=1e072ad1_2 )


	Worldwide Update Periodic roundup of recent and upcoming actions and activities by auditing and accounting organizations throughout the world.


	International IASB – International Accounting Standards Board (www.ifrs.org) Exposure Draft - Targeted Improvements—Proposed amendments to IAS 37, issued November 12, 2024, “would clarify how companies assess when to record provisions and how to measure them. The amendments would also require companies to provide more information about the measurement.” Comment period ends March 12, 2025. Contracts Referencing Nature-dependent Electricity—Amendments to IFRS 9 and IFRS 7, issued December 18, 2024, “to help companies better report the financial effects of nature-dependent electricity contracts, which are often structured as power purchase agreements (PPAs)…These amendments are required to be applied for annual reporting periods beginning on or after 1 January 2026. Companies can apply the amendments earlier.” IFAC – International Federation of Accountants (www.ifac.org) Building Trust in Sustainability Reporting and Preparing for Assurance: Governance and Controls for Sustainability Information, guidance issued December 19, 2024, “provides a roadmap for organizing and enhancing governance and control systems. The guidance outlines steps to align sustainability and financial reporting in terms of quality, timing, and connectivity, and addresses challenges in sustainability reporting.” IFR4NPO - International Financial Reporting for Non-Profit Organisations (www.ifr4npo.org) No new developments. IOSCO – International Organization of Securities Commissions (www.iosco.org) No new developments. ACCA – Association of Chartered Certified Accountants (www.accaglobal.com) Principles of Good Corporate Reporting, guidance published November 19, 2024. “With today’s increasingly diverse audiences, corporate reporting is constantly evolving, resulting in a blend that is simultaneously familiar and foreign. This research explores the characteristics and qualities of corporate reporting for general purposes that remain relevant throughout this constant change, while considering the impact of current developments on the reporting landscape.”


	Africa, Europe, India and the Middle East (AEIME) FRC – Financial Reporting Council of the UK (www.frc.org.uk) FRED 86 Draft amendments to FRS 101 Reduced Disclosure Framework – 2024/25 cycle, published December 13, 2024. “These proposals relate to developments in IFRS Accounting Standards, notably new standards, IFRS 18 'Presentation and Disclosure in Financial Statements' and IFRS 19 'Subsidiaries without Public Accountability: Disclosures'.” Comment period ends March 7, 2025. ICAEW - Institute of Chartered Accountants in England and Wales (https://www.icaew.com/) How to make AI work for risk and compliance, published November 20, 2024. “Accounting intelligence case study: risk-management company Cential has developed several use cases for AI in the governance, risk and compliance space, with controls to ensure privacy and accuracy.” EC – European Commission (https://ec.europa.eu/) No new developments. EFRAG – European Financial Reporting Advisory Group (www.efrag.org) Statement of Cash Flows, discussion Paper published November 25, 2024. Objective is “to list the perceived issues with the statement of cash flows as prepared in accordance with IAS 7 Statement of Cash Flows. Comment period ends May 15, 2025.


	Americas, Asia, Australia and New Zealand (AAANZ) AICPA & CIMA – American Institute of Certified Public Accountants (www.aicpa.org) No new developments. FASB – Financial Accounting Standards Board (www.fasb.org) Exposure Draft - Interim Reporting, Proposed Accounting Standards Update Issued: November 13, 2024, “to improve the guidance in Topic 270, Interim Reporting, by improving the navigability of the required interim disclosures and clarifying when that guidance is applicable. The proposed amendments also provide additional guidance on what disclosures should be provided in interim reporting periods. Comments Due: March 31, 2025. Exposure Draft - Government Grants, Accounting for Government Grants by Business Entities, Proposed Accounting Standards Update Issued: November 19, 2024, “to improve generally accepted accounting principles (GAAP) by establishing authoritative guidance on the accounting for government grants by business entities.” Comments Due: March 31, 2025. Exposure Draft - Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures - Clarifying the Effective Date, Proposed Accounting Standards Update Issued: December 19, 2023, “would amend the effective date of Update 2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted.” Comments Due: December 10, 2024. Debt—Debt with Conversion and Other Options ASU 2024-04, issued November 23, 2024, “to improve the relevance and consistency in application of the induced conversion guidance in Subtopic 470-20, Debt— Debt with Conversion and Other Options.” Effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted. Exposure Draft - Financial Instruments—Credit Losses (Topic 326) - Measurement of Credit Losses for Accounts Receivable and Contract Assets for Private Companies and Certain Not-for-Profit Entities, Proposed Accounting Standards Update Issued: December 3, 2024. “The amendments in this proposed Update introduce a practical expedient and a related accounting policy election for private companies and certain not-for-profit entities related to the application of Subtopic 326-20 to current accounts receivable and current contract assets arising from transactions accounted for under Topic 606” (Revenue from Contracts with Customers). Comments Due: January 17, 2025. Exposure Draft - Environmental Credits and Environmental Credit Obligations - Proposed Accounting Standards Update Issued: December 17, 2024, “to improve the financial accounting for and disclosure of environmental credits and environmental credit obligations. This proposed Update provides recognition, measurement, presentation, and disclosure requirements for all entities that purchase or hold environmental credits or have a regulatory compliance obligation that may be settled with environmental credits.” Comments Due: April 15, 2025. Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures - Clarifying the Effective Date, ASU 2025-01, issued January 6, 2025, “amends the effective date of Update 2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption of Update 2024-03 is permitted.” GASB – Governmental Accounting Standards Board (www.gasb.org) Exposure Draft - Subsequent Events, Proposed Statement of the Governmental Accounting Standards Board, published November 13, 2024, “would clarify the subsequent events that constitute recognized and nonrecognized events and establish specific note disclosure requirements for nonrecognized events.” Comment period ends February 21, 2025. Exposure Draft - Implementation Guidance Update—2025, Proposed Statement of the Governmental Accounting Standards Board, published November 13, 2024, “to provide guidance that clarifies, explains, or elaborates on GASB Statements.” Comment period ends January 24, 2025 COSO - The Committee of Sponsoring Organizations of the Treadway Commission (www.coso.org) Achieving Effective Internal Control Over Robotic Process Automation, published December 10, 2024, “addresses critical governance challenges in the rapidly growing field of Robotic Process Automation (RPA). As RPA continues to reshape organizations by automating repetitive, rules-based tasks, this publication provides essential guidance for integrating RPA governance requirements with the COSO Internal Control Integrated Framework (ICIF).” PCAOB – Public Company Accounting Oversight Board (www.pcaob.org) Firm and Engagement Metrics Summary: PCAOB Release No. 2024-012, November 21, 2024. “adopting amendments to its rules and reporting forms to require the reporting of specified firm-level metrics on new Form FM, Firm Metrics, and specified engagement-level metrics on an amended and renamed Form AP, Audit Participants and Metrics…For firm-level metrics, we proposed an effective date beginning October 1 of the year after approval by the SEC, with the first reporting period ending the following September 30. We also proposed a phased implementation period: Firms that issued audit reports with respect to more than 100 issuers in the calendar year preceding the effective date would begin reporting firm-level metrics in the first year; and All other firms would begin reporting firm-level metrics one year later. For engagement-level metrics, we also proposed a phased implementation period: Firms that issued audit reports with respect to more than 100 issuers in the calendar year preceding the effective date– for audits of companies with fiscal years beginning on or after October 1 of the year after the year in which SEC approval is obtained; and All other firms – for audits of companies with fiscal years beginning on or after October 1 two years after the year in which SEC approval is obtained.” SASB – Sustainability Accounting Standards Board (www.sasb.org) No new developments SEC – Securities and Exchange Commission (www.sec.gov) No new developments


	Additional A&A News Navigating a new era of corporate reporting The accounting implications of a Bitcoin reserve Beneficial ownership reporting is in limbo—but you should plan for it anyway, experts say FASB clarifies DISE effective dates Fraud Risks in the Market for Nonfungible Tokens AI-powered audit analytics offer value for auditors and clients


	Audit & Accounting Alert is a publication of Integra International intended to highlight emerging issues in the profession. The goal is to give Integra members an awareness of developments impacting the practice of Audit & Accounting enabling them to stay on the forefront of industry trends.This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice. Editor Gerald E. Herter Email: [email protected] www.Integra-International.net © 2021 Integra International. All Rights Reserved. If you wish to stop receiving email from us, you can simply remove yourself by visiting http://members.integra-international.net/members/EmailOptPreferences.aspx?id=66979517&e=lois.pares@integra-international.net&h=d523ac69369762eb987573d57c33e956f959035d.