European Study Examines Mandatory Audit Rotations
A study from Europe has determined that requiring public companies to change audit firms every few years may be a bad idea. The study, which covered the Public Company Accounting Oversight Board’s Concept Release No. 2011-006, Auditor Independence and Audit Firm Rotation, revealed dissimilarities between the trust clients maintain in auditors and professional skepticism auditors exhibit toward clients. Those in support of mandatory audit rotations say a lengthy relationship between auditors and clients can negatively impact an auditor’s skepticism and objectivity, leading to a reduced audit quality. They also believe term limits would offset an auditor’s inclination to have a. Read More.
PCAOB Revises Form AP Staff Guidance
The Public Company Accounting Oversight Board (“PCAOB”) has provided staff guidance updates for Form AP, Auditor Reporting of Certain Audit Participants. Issued as Staff Guidance on Form AP, Auditor Reporting of Certain Audit Participants and Related Voluntary Audit Report Disclosure Under AS 3101, Reports on Audited Financial Statements , the update replaces the January edition and offers firms guidance on professional staff in secondment arrangements. Form AP requires the disclosure of participating firms and engagement partners in public company audits. Firms must file Form AP for public company audit reports released on or after January 31, 2017 (for engagement partners), and June 30, 2017 (for other participating audit firms).
Updated PCAOB Agenda Delays Standard-Setting Projects
The Public Company Accounting Oversight Board’s (“PCAOB”) efforts to finalize and propose new standards are on hold by one quarter, according to the audit regulator’s updated standard-setting agenda. Projects that will be delayed include expansion of the auditor’s report, which the PCAOB hopes to adopt a final rule in the first quarter of 2017. PCAOB Chairman James Doty originally wanted the project completed last year. Two other projects delayed are proposals regarding audits of accounting estimates and the use of specialists. Originally expected to be issued during the first quarter, both proposals are now set for a second quarter release.
Proposed Statement on Auditing Standard on Going Concern Issued
The American Institute of Certified Public Accountants’ Auditing Standards Board (“ASB”) has proposed a Statement on Auditing Standard (“SAS”) concerning an auditor’s responsibilities during the audit of financial statements with regard to going concern and the impact on the auditor’s report. Issued as the exposure draft Proposed Statement on Auditing Standards: The Auditors Consideration of an Entity’s Ability to Continue as a Going Concern, the proposed SAS uses a neutral accounting framework approach that can be applied to financial statement audits prepared under various frameworks. Specifically, the biggest changes proposed are the requirements pertaining to audits of special purpose frameworks,. Read More.
IAASB Supports PCAOB’s Re-Proposed Auditing Standard
In a statement issued on May 23, the International Auditing and Assurance Standards Board (“IAASB”) announced its support of the Public Company Accounting Oversight Board’s (“PCAOB”) proposed auditing standard , The Auditor’s Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion. This is the second time the audit regulator has issued the proposal, which would require auditors performing audits under the PCAOB’s standards to disclose in the auditor’s report details regarding critical audit matters. Read the IAASB’s statement in support of the PCAOB’s re-proposal on the International Federation of Accountants website.
PCAOB Updates Proposed Auditor Reporting Standard
The Public Company Accounting Oversight Board (“PCAOB”) has reissued a proposal to require additional information about critical audit matters in the auditor’s report. Updated from the 2013 version, the new proposal includes the standard, The Auditor’s Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion, as well as amendments related to other PCAOB standards. The 2016 proposal also retains the current auditor report’s pass/fail model and carries forward the concept of critical audit matters from the 2013 version. Refinements to the proposal include: Restricting possible critical audit matters to matters communicated or that should be. Read More.