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Financial Reporting and the Law

The Office of the Chief Auditor of the PCAOB issued an updated standard-setting agenda, providing the expected timing and key milestones for various PCAOB rulemaking projects. Some of the highlights from the agenda, which was issued on June 30, include the following:

  • Expanding the Auditor’s Report: The PCAOB staff is drafting a reproposal “in the second half of 2014” for the Board’s consideration. The reproposal will take into account comments received on the August 2013 proposal to expand the auditor’s report in order to address critical audit matters and the auditor’s responsibilities regarding other information as well as comments made at the PCAOB’s April public meeting.
  • Disclosing in the Auditor’s Report the Engagement Partner and Other Audit Participants: The PCAOB staff is drafting an adopting release for consideration by the Board during the second half of 2014. In drafting the release, the staff is taking into account comments received on the reproposal to require disclosure in the auditor’s report of the identity of the engagement partner and certain other participants in the audit, including comments related to liability and alternative locations for disclosure.
  • Framework for Reorganization of Auditing Standards: On May 7, the PCAOB issued a supplemental request for comment on its proposal for the reorganization of PCAOB auditing standards. In addition, it posted an online demonstration version of the auditing standards that reflects the reorganized standards according to the proposed framework.
  • Auditing of Estimates: The PCAOB staff plans to issue a staff consultation paper during the second half of 2014 to seek public comment regarding its effort to develop a proposed standard on auditing accounting estimates, including fair value measurements and related disclosure.
  • Quality Control Standards: The PCAOB staff anticipates it will recommend that the Board issue a concept release during the first half of 2015 regarding quality-control standards at accounting firms. This project is intended to address audit deficiencies that the PCAOB has found in inspections, which suggest the need to improve controls to prevent, deter, and detect audit deficiencies prior to issuing the audit report, including controls related to the assignment and documentation of firm supervisory responsibilities.
  • Going Concern: The PCAOB staff is considering changes to the going concern auditing standard and, in this regard, is monitoring the FASB’s consideration of an accounting standards update regarding going concern disclosure.
  • Audits Involving Other Accountants and Specialists: The PCAOB staff is drafting a proposal for the Board’s consideration during the second half of 2015 relating to the responsibilities of auditors with respect to the planning, supervision, and other aspects of audits in which other accounting firms, individual accountants, and specialists are involved as well as multi-location audits in general.
  • Auditor Rotation: The agenda states that, “[a]lthough the standard setting agenda includes no active project on audit firm rotation, the staff continues to monitor the introduction of regulatory reforms abroad, including recent actions by the European Union, and the effects on auditor independence, firm structure and audit quality.”