Amendments clarify jurisdictional issues in auditor reporting requirements

By Ken Tysiac

The AICPA Auditing Standards Board issued an amendment Thursday clarifying the format of the auditor’s report that should be used for an audit conducted in accordance with the standards of the PCAOB when the audit is not under the PCAOB’s jurisdiction.

Under Statement on Auditing Standards (SAS) No. 131, Amendment to Statement on Auditing Standards No. 122 Section 700, Forming an Opinion and Reporting on Financial Statements, an audit is under the PCAOB’s jurisdiction if PCAOB rules for the entity’s audit require the auditor to be registered with and subject to inspection by the PCAOB.

The AICPA Code of Professional Conduct requires members conducting audits under the PCAOB’s jurisdiction to conduct the audits in accordance with the standards of the PCAOB; such audits are not required to also be conducted in accordance with generally accepted auditing standards (GAAS).

SAS No. 131 clarifies how auditors should proceed when an audit is not under the jurisdiction of the PCAOB but the entity desires or is required by an agency, regulator, or contractual agreement to obtain an audit conducted under PCAOB standards. In these circumstances, the AICPA Code of Professional Conduct requires the auditor to also conduct the audit in accordance with GAAS. Examples of entities whose audits are not within the PCAOB’s jurisdiction include:

  • Clearing agencies and futures commission merchants registered with the Commodity Futures Trading Commission (CFTC).
  • Certain other entities registered with the CFTC that are not also SEC-registered brokers and dealers.

SAS No. 131 also addresses how the reporting requirements of GAAS differ from the PCAOB’s auditing standards. When the auditor refers to the PCAOB’s standards in addition to GAAS in the auditor’s report, SAS No. 131 requires the auditor to use the form of report required by PCAOB standards, amended to state that the audit also was conducted in accordance with GAAS.

The amendments take effect for audits of financial statements for periods ending on or after June 15, 2016. Early application is permitted.

Ken Tysiac (ktysiac@aicpa.org) is a JofA editorial director.

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