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Dennis McGowan, vice president at the Center for Audit Quality, participated in a video interview during Nareit’s REITwise: 2024 Law, Accounting & Finance Conference held March 19-21 in Hollywood, Florida.

McGowan discussed key insights from a recent Public Company Accounting Oversight Board (PCAOB) proposal that aims to transform audit practices concerning non-compliance with laws and regulations (NOCLAR).

The proposed changes require auditors to identify relevant laws and regulations, assess risks of misstatement, and communicate findings of non-compliance, including fraud. McGowan emphasized stakeholder concerns about the proposal's scope and impact on audit practices. Some CPA board members expressed reservations about the standard, echoing sentiments from various stakeholders.

A recent virtual roundtable hosted by the PCAOB further explored these concerns. McGowan highlighted three key takeaways from the event. First, auditors expressed willingness to expand efforts regarding NOCLAR. Second, there was broad consensus that auditors should begin by understanding a company's compliance processes. Finally, participants recommended that the PCAOB re-propose the standard due to lingering uncertainties and varied opinions.

Looking ahead, the PCAOB's short-term agenda includes several projects beyond NOCLAR, such as attestation standards, going concern, and engagement performance metrics. Stakeholders are urged to monitor these developments closely, particularly the forthcoming proposals on going concern and engagement performance metrics, which may impact a broader audience beyond the audit profession, McGowan noted.