An auditing standard on communications between auditors and audit committees that has been under development for more than two years will be among the most-watched items in the accounting profession this week.
The PCAOB will consider the reproposed standard for adoption during an open meeting of the PCAOB at 9:30 a.m. Wednesday in Washington.
The standard was proposed March 29, 2010, and reproposed Dec. 20, 2011, after the PCAOB received feedback from stakeholders. The proposed standard was designed to enhance the relevance and quality of communications between the auditor and the audit committee with actions that include:
- Enhancing the auditor’s inquiries of the audit committee regarding matters relevant to the audit, including: knowledge of violations or possible violations of laws or regulations and complaints or concerns raised regarding financial reporting matters.
- Requiring the auditor to communicate to the audit committee an overview of the overall audit strategy, including the significant risks the auditor identified, and to update the audit committee regarding significant changes to the planned audit strategy or identified risks.
- Enhancing auditor communication with the audit committee regarding the company’s accounting policies, practices, and estimates by aligning the communication requirements with the auditor’s performance requirements.
- Requiring the auditor to communicate significant unusual transactions and the auditor’s understanding of the business rationale for such transactions.
A webcast of the open meeting will be available at the PCAOB website.
Vote coming on auditing standards proposal
The AICPA Auditing Standards Board (ASB) is set to vote Thursday on whether to issue an exposure draft to propose amending two clarified standards that take effect Dec. 15.
In response to member requests for further clarity, the ASB plans to propose Omnibus Statement on Auditing Standards—2012. This proposed statement on auditing standards would amend the following two sections of SAS No. 122, Statements on Auditing Standards: Clarification and Recodification:
- Section 600, Special Considerations—Audits of Group Financial Statements (Including the Work of Component Auditors) (AICPA, Professional Standards, AU-C sec. 600).
- Section 800, Special Considerations—Audits of Financial Statements Prepared in Accordance With Special Purpose Frameworks (AICPA, Professional Standards, AU-C sec. 800).
The exposure draft proposes to amend AU-C section 600 to, among other things, permit making reference to the audit of a component auditor in the auditor’s report on the group financial statements when the component’s financial statements are prepared using a different financial reporting framework than that used for the group financial statements, if certain criteria are met. The ASB is specifically seeking comments on this issue.
In addition, the exposure draft proposes to amend AU-C section 800 to add a definite set of criteria having substantial support that is applied to all material items appearing in financial statements to the bases of accounting defined as special-purpose frameworks.
The vote on whether to issue the proposed SAS for exposure will take place during an open ASB meeting to be held by conference call at 10 a.m. on Thursday. Those who wish to attend the call can register on the ASB’s meeting page at the AICPA’s website or contact Sherry Hazel at firstname.lastname@example.org. The proposed SAS may be viewed on the ASB meeting page.
The comment period on the ED is expected to end Oct. 30, and the ASB plans to issue a final SAS to be effective Dec. 15.
Not-for-profit guide coming
A working draft of a proposed audit and accounting guide, Not-for-Profit Entities, is scheduled for release Wednesday by the AICPA Financial Reporting Executive Committee (FinREC).
Enhancements to the proposed guide, which addresses many new accounting issues that have emerged over recent years, will include:
- A greatly expanded section about reporting relationships with other entities.
- New sections about reporting and measuring noncash gifts.
- A greatly expanded section about municipal bond debt.
- New guidance for reporting the expiration of donor-imposed restrictions.
- Greatly expanded discussion about the legal and regulatory environment in which not-for-profit entities operate.
The working draft will not include general and specific auditing considerations, analytical procedures, or reporting or considerations of internal control.
The AICPA will be requesting that comments on the proposed guide be provided during a 60-day period, ending Oct. 15. FinREC will consider these comments before issuing a final version. The draft will be available on the AICPA website.
—Compiled by JofA staff editors.