News Highlights for June 2010

The PCAOB proposed for comment an auditing standard, Communications with Audit Committees, and a series of related amendments to its interim standards.

The proposal includes a requirement for the auditor to establish a mutual understanding of the terms of the audit engagement with the audit committee and to document that understanding in an engagement letter.

It also includes requirements relating to:

• Communication of an overview of the audit strategy, including a discussion
• of significant risks, the use of the internal audit function; and the roles, responsibilities
• and location of firms participating in the audit.
• Communication regarding critical accounting policies, practices and estimates.
• Communication regarding the auditor’s evaluation of a company’s ability to
• continue as a going concern.
• Evaluation by the auditor of the adequacy of the two-way communications.

The proposed auditing standard would supersede PCAOB interim standard AU section 380, Communication With Audit Committees, and AU section 310, Appointment of the Independent Auditor, and amend a number of other interim standards. If adopted by the PCAOB, the standard would be submitted to the SEC for approval.

The comment period ended May 28.

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