A recent staff audit practice alert from the PCAOB provides information for auditors to consider as they apply the board's standards to auditing of clients' implementation of FASB's new revenue recognition standard.
The new revenue recognition standard takes effect in 2018 for public companies and the following year for nonpublic companies. Companies implementing the standard may develop new systems, processes, and controls as they prepare to gather data, make estimates, and provide disclosures required by the new standard.
This may pose increased risks of material misstatement, including misstatement due to fraud, according to the PCAOB alert. In Staff Audit Practice Alert No. 15, Matters Related to Auditing Revenue From Contracts With Customers, the PCAOB highlights the board's requirements and other considerations for audits, including:
- Transition disclosures and transition adjustments.
- Internal control over financial reporting.
- Fraud risks.
- Revenue recognition.
PCAOB revises other auditors' proposal
The PCAOB is revising its proposal that spells out requirements for a lead auditor to supervise other auditors, and the board recently voted to seek additional comments on the proposal.
The board is seeking to strengthen existing requirements and create a more uniform approach to a lead auditor's use of other auditors from other audit firms. If approved, the proposal would describe a lead auditor's responsibilities for planning, supervising, and evaluating the work of other auditors.
Following the initial proposal, the PCAOB received comments seeking clarifications to some provisions and changes to others. For example, the PCAOB is proposing certain clarifications and refinements to the requirements for providing instructions to—and reviewing the work of—other auditors.
In a supplemental request for comment, the board asked for additional comments on the revisions to the proposal. Comments were due Nov. 15.