PCAOB standard for auditing revenue may be on the horizon

BY KEN TYSIAC

Auditing revenue will need to be an area of focus for PCAOB standard setting in the near future, PCAOB member Jay Hanson said in a speech Monday.

FASB and the International Accounting Standards Board are in the closing stages of developing a converged financial reporting standard for revenue recognition. The standard is scheduled to be released in the fourth quarter of 2013, with application required for reporting periods beginning on or after Jan. 1, 2017.

Hanson said the converged standard “will fundamentally change the basis for revenue recognition,” and the PCAOB is monitoring its development.

“It is my hope that the PCAOB will soon devote substantial resources to an audit standard project in this area, and that we will be able to issue a proposal on auditing revenue with sufficient lead time to allow new accounting and auditing standards to become effective at or around the same time,” Hanson said at the Brigham Young University Accountancy Alumni Conference in Provo, Utah.

Auditing revenue is not yet on the PCAOB’s standard-setting agenda. But Hanson said that in view of revenue’s significance, the PCAOB needs to give the issue consideration.

“Revenue is probably the most important number on the financial statements for most investors,” Hanson said. “And it is one in which our inspectors frequently find problems. Revenue recognition also is a complex accounting area.”

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

SPONSORED REPORT

Questions to ask before committing to the cloud

Cloud computing has its pros and cons. In this report, we answer common questions CPAs may have as they consider transitioning partially or fully to the cloud.

QUIZ

News quiz: IRS reopens an online service, but criticism endures

The IRS brings back the Get Transcript Online service, but the agency faces criticism for its handling of the aftermath of the event that led to the shutdown of the service. See how much you know about other recent news with this quiz.

CHECKLIST

Auditing risks in culture

Cultural flaws can seriously damage an organization. Here’s how internal auditors can reduce risks by embedding culture audits into existing audit programs.