PCAOB outlines related parties proposal, other amendments

BY KEN TYSIAC

The PCAOB on Tuesday issued for public comment a proposed auditing standard on related parties and proposed amendments on significant unusual transactions. The board said the proposals are designed to improve auditors’ focus on certain areas of risk.

In addition, the PCAOB proposed amendments to its rules and forms to apply them to auditors of SEC-registered brokers and dealers, as authorized by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, P.L. 111-203.

The related parties proposal would supersede interim auditing standard AU sec. 334, Related Parties. the PCAOB said it is designed to improve auditors’ evaluations of public companies’ identification of, accounting for, and disclosure about their relationships with related parties.

In proposing amendments to enhance auditors’ identification and evaluation of significant and unusual transactions, the PCAOB said it hopes to complement the related parties proposal. Improving auditors’ recognition of significant unusual transactions could help them identify relationships or transactions with related parties that otherwise would have gone undetected.

“Auditors have a unique vantage point from which to identify questionable and improper transactions,” PCAOB Chairman James Doty said at Tuesday’s board meeting. “We want this proposal and the related amendments to enhance the auditors’ understanding and help them be more effective in dealing with questionable transactions in their protection of investors.”

Comments on the proposed related parties standard and related amendments are due May 15.

The other proposed amendments, involving rules and forms, would add references to auditors of brokers and dealers to relevant PCAOB rules. The proposal would make the PCAOB’s auditing standards, including most of its ethics and independence requirements, applicable to audits of brokers and dealers once the SEC mandates that auditors of brokers and dealers must comply with PCAOB standards.

In addition, separate technical changes to PCAOB rules and forms unrelated to Dodd-Frank have been proposed. The PCAOB is seeking public comment on the rules, forms and technical changes proposals through April 30.

Ken Tysiac ( ktysiac@aicpa.org ) is a JofA senior editor.

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