PCAOB Expands Liability for Auditors Involved in Firm Violations – WSJ

The Public Company Accounting Oversight Board expanded liability for individuals involved in firm violations and proposed tighter rules around one of the ways auditors gather evidence to detect financial misstatements.

The U.S. audit watchdog on Wednesday voted, 5-0, to change the threshold for liability for contributors to accounting firms’ violations of auditing standards, lowering it to negligence from recklessness. The contributors are usually partners in charge of an audit or another firm that assisted in the work.

Under the existing rule, which dates to 2005, the PCAOB can hold contributors liable for firm violations if they act recklessly, meaning they took an extreme departure from the standard of ordinary care either known to them or so obvious they must have been aware….

Source: PCAOB Expands Liability for Auditors Involved in Firm Violations – WSJ