AICPA Board to Align Materiality with U.S. Standard-Setters
At a meeting in January, the American Institute of Certified Public Accountants’ (“AICPA”) Auditing Standards Board (“ASB”) agreed to align its “materiality” definition with the definitions used by the Financial Accounting Standards Board (“FASB”), Securities and Exchange Commission (“SEC”), and Public Company Accounting Oversight Board (“PCAOB”). The narrow project aims to remove inconsistencies in the definition among AICPA Professional Standards and the Supreme Court, SEC, FASB, and the PCAOB. The effort comes after the FASB’s decision last year to revert to its original “materiality” definition from 1980 to 2010. The FASB revised its definition to align its concept of materiality to determine what information should be included and omitted from a. Read More.
PCAOB to Clarify Hiring of Hearing Officers
The Public Company Accounting Oversight Board (“PCAOB”) has proposed amendments to affirm that its hiring practices for hearing officers for auditor disciplinary proceedings are subject to approval by the Securities and Exchange Commission (“SEC”). Announced last week, the proposed changes come after last summer’s Supreme Court ruling in Lucia vs. SEC that the agency’s process for hiring administrative law judges was unconstitutional. The Supreme Court stated that under the Appointments Clause of the U.S. Constitution, administrative law judges are inferior officers and must be appointed by the president, a court of law, or a department head (e.g, the SEC). The. Read More.
SEC Approves PCAOB’s 2019 Budget
One month after the new Public Company Accounting Oversight Board (“PCAOB”) leadership approved a budget increase for 2019 , the Securities and Exchange Commission (“SEC”) published a release approving the PCAOB budget. Release No. 33-10592, Order Approving Public Company Accounting Oversight Board Budget and Annual Accounting Support Fee for Calendar Year 2019, gives the PCAOB the ability to have a $273.7 million budget this year. This year’s budget is a 5.3 increase from 2018 ($259.9 million). Release No. 33-10592 also orders the PCAOB to schedule monthly meetings during 2019 with SEC staff to provide updates on initiatives that could impact the 2020 budget. Additionally this year, the SEC PCAOB must continue providing the SEC. Read More.
PCAOB Releases Consistent Approach to Auditing Accounting Estimates
In its first standard-setting move since undergoing a complete leadership change early last year, the Public Company Accounting Oversight Board (“PCAOB”) unanimously approved a standard to improve audits of accounting estimates. Issued as Release No. 2018-005, Auditing Accounting Estimates, Including Fair Value Measurements, the standard provides auditors a more consistent approach to auditing accounting estimates. Previously, auditors used three standards to audit estimates: Auditing Standard (“AS”) 2501, Auditing Accounting Estimates; AS 2502, Auditing Fair Value Measurements and Disclosures; and AS 2503, Auditing Derivative Instruments, Hedging Activities, Investments in Securities. While the standards employ a common approach to testing estimates, they differ in explaining the. Read More.
PCAOB Approves Standard for Auditor’s Use of Specialists
Last month, the Public Company Accounting Oversight Board (“PCAOB”) published a final standard aimed to strengthen the requirements for an auditor’s use of specialists. Release No. 2018-006, Amendments to Auditing Standards for Auditor’s Use of the Work of Specialists, improves how an auditor uses the work of specialists and reinforces the provisions necessary for reviewing the work of an organization’s specialist. The revised standard also aligns with the PCAOB’s risk assessment standards. Specifically, an auditor must now test the suitability of an organization’s data, as well as the significant assumptions and methods applied. PCAOB member Duane DesParte noted that the amendments. Read More.
Group Wants Quality Control Standards to Cover Firm Governance and Leadership
With the Public Company Accounting Oversight Board (“PCAOB”) researching whether to update quality control standards, its Standing Advisory Group (“SAG”) believes the standards should be amended to include firm governance and leadership. Talking to reporters after the SAG’s November 29 meeting, PCAOB Chairman William Duhnke said the board may elevate its research on the standards to a standard-setting project sometime next year but is currently determining the next steps. The PCAOB’s quality control standards mandate accounting firms to employ systems with reasonable assurance that a firm’s employees meet professional standards and the firm’s quality standards. Firm governance and leadership include. Read More.