SEC approves of a new PCAOB quality control standard 

On Sept. 9, 2024, the U.S. Securities and Exchange Commission (the SEC) announced the approval of the Public Company Accounting Oversight Board’s (the PCAOB) new quality control (QC) standard and related amendments to its standards, rules and forms (collectively, “QC 1000”).   

The PCAOB believes QC 1000 will lead registered firms to significantly improve their QC systems by establishing an integrated, risk-based quality control standard that will require registered firms to identify specific risks to their practice and design a QC system that includes appropriate responses to guard against those specific risks. QC 1000 will take effect on Dec. 15, 2025. 

QC 1000 results in the following: 

• Require all registered firms to design their QC systems to comply with QC 1000, including: 
• Establishing specific quality objectives outlined in the standard. 
• Identifying and assessing quality risks to the achievement of those objectives. 
• Developing policies and procedures to address such risks. 
• Require registered firms that perform engagements (i.e., audits) for public companies or SEC-registered brokers and dealers to also implement and operate their QC system to comply with the standard, including: 
• Executing the developed policies and procedures. 
• Monitoring the operation of the policies and procedures. 
• Taking remedial actions where policies and procedures are not operating effectively. 

QC 1000 improves on the existing QC standards in the following ways: 

• Requires annual reporting on QC system effectiveness to audit committees of every issuer and broker-dealer client and on a new form (Form QC) to the PCAOB by firms that perform or have responsibilities with respect to the engagements under PCAOB standards. 
• Addresses the accurate description and disclosure of any firm-level or engagement-level information the firm may publish (i.e. performance metrics and statistics). 
• Requires involvement of independent individuals in firm governance for the largest firms. 
• Expands the responsibility of auditors to correct deficiencies identified on engagements. 
• Creates a new “Integrity and Objectivity” standard to better align the PCAOB’s ethics requirements with QC 1000. 
• Requires firms to have policies and procedures that address their use of technological resources.  

Baker Tilly’s assessment 

QC 1000 will address changes in the audit practice that the PCAOB has learned through their inspections of PCAOB registered firms and through their enforcement programs. Some of these changes in the audit practice pertain to the participation of outside resources and other firms on firm engagements, the use of evolving technology, and the role of firm networks. The improved QC standards also is intended to provide investors with protection and improved comfort over the financial statements that they rely upon. 

As QC 1000 is effective Dec. 15, 2025, PCAOB registered firms should begin to implement the requirements of QC 1000 to ensure they are in compliance with the new standard.