PCAOB Highlights 2025 Audit Priorities Amid Technology and Crypto Risks

WASHINGTON, December 9, 2024 – The Public Business Accounting Supervisory Board (PCAOB) launched its 2025 priority by addressing the significant audit risks arising from increased technology adoption, cyber security threats and the complexity of critical assets. While these views are ​not formal rules or guidelines for the Board, they highlight the main concerns for ​audit inspections and audit responsibilities over the next year.

According to the PCAOB, the rapid integration of advanced technologies, such as GenAI, and the continued increase ​in cybersecurity incidents present changing challenges for ​public ​businesses and corridors. Staff Priorities ​To highlight reforms in how these issues affect financial information, audit procedures, ​and regulatory compliance, particularly in ​light of the new Securities Commission (SEC) cybersecurity disclosure rules.

Electronic security and technological risks

Public ​enterprises are increasingly using technology to streamline operations and manage ​financial reporting processes, but this unit also poses cyber security challenges. HPFB announced its intention to ​focus on audits of entities that reported cyber security incidents, examining the capacity of audit firms to respond and ​the adjustments made to their audit procedures.

The disclosure requirements for ESA cybersecurity incidents highlighted ​the need for transparent risk reporting. Office staff will assess whether public enterprises ​and corridors meet these requirements and ​effectively manage cyber security risks. As companies explore GenAI’s ​potential ​in their operations, the Office continues to monitor associated risks. The generic IA could amplify existing vulnerabilities or introduce new risks, particularly with regard ​to global IT controls and financial information.

The Office intends to monitor public companies that invest heavily in AI, review related ​disclosures and ensure that audit procedures take these new risks into account. This approach reflects a broader commitment to improving the tracking of technology-based audit issues.

Crypto ​Audit Active ​and Complex

Audits related to cryptomoneda pose unique challenges, including verifying the existence and rights to digital assets, testing CIM controls for block chain transactions, and resolving fraud risks inherent ​in the ​anonymity of ​cryptographic assets. Distributed accounting technologies further ​complicate the audit process ​by creating problems to ​ensure the integrity and accuracy of evidence.

As part of its 2025 priorities, the PCAOB will focus more on audits of public enterprises and corridors with significant ​cryptographic assets or cryptographic transactions. The publication of the Financial Accounting Standards Board (FASB) Financial Accounting Standards, ​Update No. 2023-08, marks a fundamental development in the ​U.S. GAAP, which explicitly addresses accounting and disclosure of cryptographic assets. Although the standard is in effect ​for fiscal years beginning after December 15, 2024, early adoption is authorized, and BBCP inspections will monitor ​companies implementing these changes by the deadline.

The Role of General AI in ​Financial Processes

The incorporation of AIGG ​by public enterprises ​indicates a transformative change in financial reporting. ​However, it also raises red flags on operational risks and computer security. The review of the adoption of PCAOB ​GenAI highlights the importance of sound audit procedures to maintain ​transparency ​and protect against data breaches or errors in financial reporting.

By monitoring the disclosure of significant investments in artificial intelligence, ​the ​BBCP is intended to ensure that businesses address potential vulnerabilities of the CIT and other ​related ​controls. These ​measures aim to strike ​a balance between the ​use of advanced technologies and ​the mitigation of risks associated with ​financial processes.

Focus on Auditor Responsibilities

The emphasis of ​the PCAOB 2025 ​underlines the importance of the adaptability and monitoring of auditors in the face of the ​rapid evolution of financial and technological landscapes. Auditors are expected to adopt a proactive approach, integrating information on cyber security incidents and artificial intelligence applications to improve the reliability of their procedures.

The Office will also work actively with audit ​committees, fostering dialogue on critical ​issues such as ITGC, fraud risk assessment and compliance with new ​standards. This collaborative ​approach aims to build confidence and accountability in financial reporting.

The update on staff priorities highlights the Office’s ongoing efforts to address contemporary audit challenges while fostering transparency and investor confidence. By focusing on technological risks and complex asset classes, the PCAOB ​seeks to maintain the integrity of audits of public companies in an increasingly digital world.