PCAOB's Commitment to Quality Audits– Current Focus on Six Items

Since its formation, the Public Company Accounting and Oversight Board (PCAOB), has sought to establish and maintain high-quality auditing and related professional practice standards for audits of issuers and brokers and dealers in support of the PCAOB’s overall mission to protect investors and the public interest. Each of the PCAOB’s current six projects aims to do just that:

  1. Supervision of audits involving other auditors:  proposes a new standard when the lead shareholder divides responsibility with another firm.  The role of other auditors has taken on greater significance with continued global expansion by public registrants.
  2. Auditors’ reporting model: seeks to expand the auditors’ report to provide more information to investors and other financial statement users, through disclosure of “critical audit matters (CAM).”  Potential disclosures would include accounts or disclosures that are material to the financial statements, as well as additional information regarding the auditors’ independence and responsibilities for fraud and financial notes.
  3. Auditing accounting estimates, including fair value measurement:  in recent years, the role of fair value measurement and accounting has expanded within GAAP.  The PCAOB continues to evaluate the needs of financial statement users and auditors alike, related to fair value measurement. 
  4. The auditors’ use of the work of specialists:  Like fair value measurement, the use of the work of specialists has continued to expand over time to correspond with the increasing complexity of transactions.  The PCAOB is evaluating the role specialists play, whether used by management in the preparation of the financial statements, or relied upon by the independent auditor. 
  5. Going concern: The staff is seeking input in order to improve the existing standard as they study the effectiveness of the current model.
  6. Quality control standards, including assignment and documentation of firm supervisory responsibilities:  After 10+ years of experience performing inspections of public accounting firms that perform audits of public registrants, the PCAOB is assessing the need to revisit the quality control standard and the impact a that revision could have in reducing the extent of audit deficiencies identified during the inspection process.

You can follow the PCAOB’s progress on these and other developments at www.pcaob.org.

Please contact us with questions regarding the PCAOB’s projects and visit the Our Thoughts On blog for similar articles.

 

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