The PCAOB has proposed expanding liability for individual auditors and certain accounting firms when they contribute to violations by the primary firms handling an audit.
The current rule, dating back to 2005, focuses on the liability of contributors to registered accounting firms’ violations of auditing standards.
The PCAOB wants to lower the threshold for liability to negligence from recklessness for contributors.
The proposal would allow the PCAOB to penalize partners or assisting firms that played a direct and substantial role in conflicts of interest and failures related to audit quality controls.
Yet, some PCAOB members have expressed concern that the rule change could encourage junior auditors to leave the profession, exacerbating the accounting talent crisis. Learn more.