Auditing revenue will need to be an area of focus for PCAOB standard setting in the near future, PCAOB member Jay Hanson said in a speech Monday.
FASB and the International Accounting Standards Board are in the closing stages of developing a converged financial reporting standard for revenue recognition. The standard is scheduled to be released in the fourth quarter of 2013, with application required for reporting periods beginning on or after Jan. 1, 2017.
Hanson said the converged standard “will fundamentally change the basis for revenue recognition,” and the PCAOB is monitoring its development.
“It is my hope that the PCAOB will soon devote substantial resources to an audit standard project in this area, and that we will be able to issue a proposal on auditing revenue with sufficient lead time to allow new accounting and auditing standards to become effective at or around the same time,” Hanson said at the Brigham Young University Accountancy Alumni Conference in Provo, Utah.
Auditing revenue is not yet on the PCAOB’s standard-setting agenda. But Hanson said that in view of revenue’s significance, the PCAOB needs to give the issue consideration.
“Revenue is probably the most important number on the financial statements for most investors,” Hanson said. “And it is one in which our inspectors frequently find problems. Revenue recognition also is a complex accounting area.”
—Ken Tysiac (firstname.lastname@example.org) is a JofA senior editor.