The Public Company Accounting Oversight Board (PCAOB) issued Staff Audit Practice Alert no. 1, Matters Relating to Timing and Accounting for Options Grants, which advises auditors of emerging risks to consider during audits of financial statements or of internal controls over financial reporting ( www.pcaobus.org/news_and_events/ ). The alert was prompted when it became known that certain issuers had reported granting stock options to employees earlier than was true in order to improve the grants’ value to recipients.
The AICPA, the American Accounting Association and the International Auditing and Assurance Standards Board (IAASB) of the International Federation of Accountants (IFAC) have joined forces to launch a research initiative that will help standard setters and regulators better understand how users in countries around the world perceive the financial statement audit and the auditor’s report ( www.aicpa.org/download/news/2006/ ).
The AICPA Auditing Standards Board (ASB) and the IAASB issued a request for proposals in August soliciting academic research to identify and provide information about such perceptions with regard, specifically, to an unqualified auditor’s report ( www.aicpa.org/download/news/2006/AICPA_AAA_IAASB_RFP.pdf ). Proposals are due October 2, 2006. The ASB and IAASB will fund $10,000 to $20,000 for each project. Researchers, who will be required to submit a summary of their results by October 1, 2007, and a more detailed report to the two boards by January 7, 2008, will have the right to publish their findings.
Meanwhile the ASB has a project under way to consider whether the auditor’s report should be revised, and the IAASB recently completed a similar project. Information gleaned from the new research will be used as a basis for any future revisions to the auditor’s report.
The AICPA released conforming amendments to chapter 5, “Reporting on an Entity’s Internal Control Over Financial Reporting” (AT 501) of Statement on Standards for Attestation Engagements no. 10, Attestation Standards: Revision and Recodification. The changes bring AT 501 into conformity with corresponding aspects of Statement on Auditing Standards (SAS) no. 112, Communicating Internal Control Matters Identified in an Audit, which introduced terms, definitions and guidance on identifying and evaluating control deficiencies and communicating significant deficiencies and material weaknesses. To coincide with the effective date of SAS no. 112, the conforming changes are effective when the subject matter or assertion is as of—or for a period ending on or after—December 15, 2006, although earlier application is permitted ( www.aicpa.org/download/members/ ).