Comment letter: PCAOB Rulemaking Docket Matter No. 51

August 3, 2023

Office of the Secretary
Public Company Accounting Oversight Board
1666 K Street, NW
Washington, DC 20006

Re: PCAOB Rulemaking Docket Matter No. 51

Dear Office of the Secretary: 

We are pleased to provide comments to the board and staff on the recently issued proposing release: 

Amendments to PCAOB Auditing Standards related to a company’s noncompliance with laws and regulations and other related amendments (the “proposal”). Baker Tilly US, LLP (“Baker Tilly,” “we,” or “our”) is currently an annually inspected public accounting firm auditing only slightly over 100 issuers, approximately 30 of which are employee benefit plan audits filing on Form 11-K. Our issuer audit practice consists primarily of smaller reporting companies in various industries, including financial institutions. We also perform audits of broker-dealers.  

Although we are a top-10 ranked firm, our organization is in the PCAOB’s category of a non-affiliated firm (“NAF”), which is substantially different from a Global Network Firm (“GNF”). 

General comments regarding the board’s standard setting agenda 

We generally welcome the board’s efforts to modernize PCAOB auditing and quality control standards and rules; however, we are concerned that the pace of change is too rapid, and the scope is too significant. Each individual project on the board’s standard setting agenda represents incremental effort for audit firms and, in turn, costs to issuers and investors. We share board member DesParte’s concern that the ambitious agenda – and this project in particular – may contribute to a widening expectations gap1. While each individual project includes an economic analysis, we believe it is imperative that the impact of this and other projects are considered in aggregate, not just individually. For NAF firms like Baker Tilly, mustering the resources to effect all of the changes represents a significant burden as well as a resource allocation constraint, as the same personnel that would be tasked with implementing new standards are also responsible for supporting engagement teams during audits, supporting the PCAOB’s inspection process, conducting internal inspections, and designing, implementing, and monitoring remediation plans, among other responsibilities. While firms can and have hired additional resources to assist with these initiatives, the needs continue to increase with each new standard issued. We are concerned that the pace of standard setting and related risks may cause middle market audit firms to exit the public company audit market or significantly reduce their portfolios, thereby reducing competition in the market and narrowing the choices available to issuers, potentially harming investors in the process. To that end, we also share the concerns of board member Ho, who noted the proposal: