SEC Approves PCAOB Amendments: Impact of AS 1105 and AS 2301 Updates on Auditors

Dominique Sieweke

Marketing Manager, AudITech

On August 20, 2024, the Securities and Exchange Commission (SEC) approved significant updates to the Public Company Accounting Oversight Board (PCAOB) standards, specifically AS 1105 (Audit Evidence) and AS 2301 (The Auditor’s Responses to the Risks of Material Misstatement). With these amendments, traditional sampling methods alone will no longer suffice. The updated standards are set to reshape auditing practices by providing clearer guidelines on the use of technology-assisted analysis. Here’s a closer look at these changes and their implications for auditors.

AS 1105 and AS 2301 Amendments

Enhanced Guidelines for Technology-Assisted Analysis: The PCAOB has updated AS 1105 and AS 2301 to better address the growing use of technology in audits. These amendments offer detailed guidance on how auditors should handle electronic data and technology-assisted procedures. The updates emphasize the importance of evaluating the reliability of electronic data and using technological tools effectively to obtain sufficient and appropriate audit evidence.

AS 1105 (Audit Evidence): The revised standard clarifies how auditors should assess the reliability of data obtained through technology-assisted methods. This includes ensuring that controls over electronic information are tested appropriately, and evidence collected through these methods meets the required standards.
AS 2301 (The Auditor’s Responses to the Risks of Material Misstatement): The amendments detail how auditors should use technology to address identified risks. This involves employing technology-assisted analysis for substantive procedures and ensuring that audit evidence gathered through these tools meets the necessary criteria.

Implications for Auditors

Adapting to New Standards: Auditors will need to revise their practices to comply with these updated standards. This includes enhancing audit procedures to incorporate technology-assisted analysis and ensuring that evidence obtained through these methods is reliable and sufficient.

Increased Focus on Technology: The amendments signal a shift towards greater integration of technology in audit processes. Auditors must become adept at using technology-assisted analysis tools to improve audit quality while adhering to stringent evidence requirements.

Strengthened Responsibilities: The updates underscore the need for auditors to maintain high standards of professionalism and skepticism. Auditors are expected to rigorously apply these standards to ensure accurate and reliable audit outcomes.

Implementation Timeline

The amendments to AS 1105 and AS 2301 will become effective for audits of financial statements for fiscal years beginning on or after December 15, 2025.

How AudITech Can Help

With traditional sampling methods becoming inadequate under the new standards, AudITechs’ ITGC Automation platform is designed to support auditors in adapting to these changes. Our platform streamlines the implementation of ITGC (Information Technology General Controls), helping auditors adapt to new standards with ease. By automating key processes and ensuring comprehensive documentation, AudITechs supports efficient, accurate, and compliant audit practices.