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Compliance insights: What accounting firms need to do now to prepare for new PCAOB auditing standards and more 

Last year, the accounting industry faced significant new regulatory challenges — and this year is shaping up to be no different. Firms are grappling with how to comply with new Public Company Accounting Oversight Board (PCAOB) auditing standards, meet personal independence and financial interest requirements amid record growth, and more.  

Below we explore the regulatory changes and trends that will have a significant impact on accounting firm compliance this year — and what your firm needs to do now to be prepared. 

2024 regulatory changes and trends 

New PCAOB auditing standards 

The PCAOB currently requires accounting firms that audit more than 500 public companies to use automated financial interest independence solutions. However, the PCAOB’s proposed new quality control standard, QC 1000, lowers that threshold to firms that audit more than 100 public companies. The new standard will likely be finalized this year — and firms that fail to meet it risk regulatory action, reputational damage, and even loss of business.  

Firms that are impacted by QC 1000, but haven’t yet deployed a compliant solution, need to take action now so they aren’t left scrambling at the last minute. 

Heightened regulatory scrutiny 

Since Erica Williams was appointed Chairperson of the PCAOB in 2021, regulatory scrutiny has increased substantially. In 2023, the PCAOB imposed more than $20 million in penalties — a jump of almost 200% from 2022. It also levied fines of $2 million or more in five different enforcement actions — an all-time high.  

Addressing gaps and inefficiencies in existing independence processes should be an urgent priority, not least because the PCAOB is likely to continue increasing its investigation and enforcement actions. In a recent statement, Chairperson Williams confirmed that the board is “just getting started.” 

Accelerated growth

Accounting firms, particularly larger ones, are experiencing significant growth — mainly due to factors including an increased focus on advisory services and M&A. According to Accounting Today, average combined revenue growth at the top 100 firms has quadrupled year over year, reaching 18.5%. 

Ensuring compliance with independence-related requirements becomes substantially more complex and time-consuming as firms take on new clients and markets. The manual compliance processes that many firms use become unsustainable as they grow, requiring them to transition to scalable, automated processes that can meet evolving business needs. 

Increased awareness of process shortcomings

As growth accelerates and quality control standards intensify, accounting firm leaders are paying increasing attention to just how burdensome their manual compliance processes really are. More than ever, we’re hearing from firm executives that their partners are frustrated with the amount of time that independence attestations take away from billable work.  

And, of course, if a firm gets audited by the PCAOB, its leaders will be even more unhappy, since they’ll likely spend a month or more compiling the required documentation. And the only thing they typically have to show for all their effort is an email trail of attestations. Unfortunately, this isn’t always sufficient for auditors, who fail them for not having sound independence processes.  

These issues are driving more and more firms to look for new solutions that support rigorous compliance monitoring and enforcement processes while minimizing the need for manual work. 

How to prepare for 2024 and beyond 

The common thread through all these changes and trends is the need for automated, scalable financial interest independence solutions. Implementing these solutions is the most important thing your firm can do right now to be prepared for new PCAOB auditing standards, heightened regulatory scrutiny, and future growth. 

A note to smaller firm leaders: If your firm audits less than 100 companies, it might be tempting to think this doesn’t apply to you, since QC 1000 doesn’t require you to use a financial interest system. However, clinging to antiquated, error-prone manual processes that tie up billable time will still hurt your top and bottom lines and impair your ability to keep up with the competition.  

Regardless of your firm’s size, your financial interest independence solution should have four key features to effectively mitigate compliance risk as regulations and business needs evolve: 

  1. Automated impairment detection: Your solution should use automation to find independence impairments — before regulators do. Solutions such as Intapp Employee Compliance automatically capture personal investment and financial interest information, then proactively alert risk teams about potential impairments so nothing falls through the cracks. These capabilities let compliance teams focus on addressing violations, instead of poring through documentation searching for them.  
  2. Flexibility: As the old adage goes, the only constant is change. To prepare for anything that comes your firm’s way — regulatory or otherwise — you need a financial interest solution that can be easily reconfigured to suit new needs and requirements. For example, you should be able to quickly modify your independence attestation workflows and questions to align with policy changes.  
  3. Customizable reports: If an auditor comes knocking, the last thing you’ll want to do is spend weeks tracking down documentation. To avoid this situation, make sure you can quickly generate reports that can be configured as needed using custom filters and criteria. Using a solution built specifically for accounting firms, like Intapp Employee Compliance, will also demonstrate to regulators that you have a rigorous process for meeting personal independence and financial interest requirements. 
  4. Painless policy enforcement: Compliance professionals should have access to dashboards and reports that provide visibility into who needs to do what, and by when. If documentation is overdue, automated alerts should “chase” offenders so your compliance teams don’t have to. To further ease your enforcement burden, your solution should be able to automatically approve, deny, or block trade requests in accordance with your firm’s policies and restricted entity list. 

The right technology partner makes all the difference 

The process of selecting and deploying an automated financial interest independence solution might seem daunting — but it doesn’t have to be. Choosing a technology partner like Intapp — which offers compliance solutions built specifically for accounting firms and brings extensive industry expertise — can make things much easier. 

Schedule a demo of Intapp Employee Compliance to learn how we can help your firm be ready for what’s to come in 2024 and beyond.