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SEC Approves PCAOB Rules on Communication with Audit Committees

Public Companies

By Donald Applegarth

The SEC has published, Public Company Accounting Oversight Board; Order Granting Approval of Proposed Rules on Auditing Standard (AS) No. 16, Communications with Audit Committees, and Related and Transitional Amendments to PCAOB Standards (Order), approving the PCAOB’s proposed Auditing Standard No. 16, Communications with Audit Committees, and amendments to other PCAOB standards. This standard establishes requirements designed to enhance the relevance and timeliness of the communications between the auditor and the audit committee, and is intended to foster constructive dialogue between the two on significant audit and financial statement matters. The standard supersedes the PCAOB’s interim auditing standards, AU sec. 310, Appointment of the Independent Auditor, and AU sec. 380, Communication with Audit Committees; and amends other PCAOB standards.

This Order includes a discussion of comments received from constituents on a number of issues, including the impact of applying AS 16 to emerging growth companies (EGCs). The Jumpstart Our Business Startups Act created a new category of issuers called EGCs that relaxes some of the SEC reporting requirements applicable to most issuers. The SEC concluded that “the application of the Proposed Rules to EGC audits is necessary or appropriate in the public interest, after considering the protection of investors and whether the action will promote efficiency, competition, and capital formation.”

The new standard and related amendments will be effective for public company audits of fiscal periods beginning after December 15, 2012. 

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