The PCAOB on Monday proposed for comment an auditing standard, Communications with Audit Committees, and a series of related amendments to its interim standards.
The proposal includes a requirement for the auditor to establish a mutual understanding of the terms of the audit engagement with the audit committee and to document that understanding in an engagement letter.
It also includes requirements relating to:
- Communication of an overview of the audit strategy, including a discussion of significant risks, the use of the internal audit function; and the roles, responsibilities and location of firms participating in the audit.
- Communication regarding critical accounting policies, practices and estimates.
- Communication regarding the auditor’s evaluation of a company’s ability to continue as a going concern.
- Evaluation by the auditor of the adequacy of the two-way communications.
The proposed auditing standard would supersede PCAOB interim standard AU sec. 380, Communication With Audit Committees, and AU sec. 310, Appointment of the Independent Auditor, and amend a number of other interim standards. If adopted by the PCAOB, the standard would be submitted to the SEC for approval.
Comments are due May 28. A podcast of Monday’s meeting is available online.
SAG to Meet in April
In other news, the PCAOB announced a meeting of its Standing Advisory Group (SAG) will take place April 7 and 8.
That meeting includes a discussion of the PCAOB’s current auditing standard-setting activities and the recommendation from the Treasury’s Advisory Committee on the Auditing Profession (ACAP) that the board consider changes to the auditor’s reporting model.
PCAOB staff also will update the SAG on comments received on the proposed suite of risk assessment standards, and seek input on the standard-setting project on the responsibilities of the principal auditor.
The board convened the SAG to advise the PCAOB on the development of auditing and related professional practice standards. The SAG, which is chaired by the PCAOB Chief Auditor and Director of Professional Standards Martin F. Baumann, includes auditors, investors, public company executives and others.
Two briefing papers are available for the SAG meeting. The first, Responsibilities of the Principal Auditor, is available here. The second, ACAP Committee’s Recommendation Relating to the Auditor’s Reporting Model, is available here. The agenda for that meeting can be found here.
meeting is open to the public and will be available via live
webcast and later podcast on the PCAOB’s Web site, pcaobus.org. Auditor’s Reporting
Model Break-Out Sessions, scheduled to take place at the SAG
meeting on April 7, will be closed to the public. A summary of the
break-out discussions will be presented on April 8.