PCAOB attempting to make auditing standards easier to navigate

BY KEN TYSIAC

The PCAOB on Tuesday took the first step toward what’s intended to be a comprehensive reorganization of its auditing standards.

Board members unanimously voted to publish a proposal for a framework that would place the PCAOB’s auditing standards into a topical structure with a single, integrated numbering system. The board is requesting comments on the framework by May 28.

PCAOB Chief Auditor Martin Baumann told the board that the current structure does not present an orderly classification of the board’s standards. The “AS” standards that have been developed by the board since its inception 10 years ago—as well as the interim “AU” standards that were adopted by the board and have not been superseded—would be placed together in a four-digit numbering system designed to follow the flow of an audit.

Neither the proposed framework nor amendments that would be necessary for implementation would add new requirements for performing or reporting on audits.

PCAOB Chairman James Doty said that the board’s current standards, when printed out, exceed 2,000 pages. He said navigating those standards can prove daunting.

Implementation costs are expected to be limited to updating methodology and reference materials, and board member Lewis Ferguson said the temporary inconvenience should be overcome by long-term efficiencies in navigating the standards.

“This release represents, in my mind, an important first step in making the PCAOB standards more available to auditors,” Doty said.

The proposed new numbering system would group the standards under the following categories:

  • General auditing standards.
  • Audit procedures.
  • Auditor reporting.
  • Matters related to filings under federal securities laws.
  • Other matters associated with audits.


The plan is for each category to have its own digit in the thousands place in the numbering system, so general auditing standards would constitute the 1000 standards, audit procedures would constitute the 2000 standards, and so forth.

For example, the standard that the PCAOB is expected to release on related parties, which would be titled “AS 17” under the current system, would be given a number in the 2000 category under audit procedures, according to Baumann.

“The long-term goal should be for us to have well-organized standards that are also readily searchable for the software tools that are available to practitioners,” Ferguson said. “… The recodification is in my view the first step to what may be a longer journey to improve the standards issued by the PCAOB.”

PCAOB Deputy Chief Auditor Keith Wilson said auditing interpretations would remain part of the standards as a result of the proposal. But rather than being interwoven in the standards, the interpretations would be presented in a different place, separate from the standards themselves. A link would be provided from each standard to its related interpretations.

Wilson said the proposed reorganization would present a comprehensive view of how the standards are intended to work together. This would allow auditors looking at a new standard to see how it is intended to be applied in conjunction with the existing standards.

Although comments during the meeting were mostly supportive, board member Steve Harris expressed concern about the board getting some of the items on its busy agenda across the finish line. He also said he has been led to believe that fewer and fewer people actually are reading the PCAOB’s standards.

“There are so many conflicting standards,” Harris said. “The chairman indicated how many pages of standards there are that are already out there. Not only in terms of the organization, but I’d hope we would streamline and simplify and put into plain English, to the maximum extent possible, our standards.”

Baumann acknowledged that the PCAOB has a busy agenda, but said moving ahead with the proposed reorganization is important.

“It is sad if people aren’t reading our standards,” Baumann said. “And to the extent that they become more difficult to navigate, that might contribute to that. Hopefully, a set of standards that’s a logical flow of how the audit works, that would make people dig into them more often.”

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

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