The PCAOB voted to propose a slate of seven auditing standards related to risk assessment and response. The standards would supersede the board’s interim auditing standards related to audit risk and materiality, audit planning and supervision, consideration of internal control in an audit of financial statements, audit evidence, and performing tests of accounts and disclosures before year-end.
The proposed standards, which were released with related conforming amendments, would establish requirements and provide direction on audit procedures performed throughout the audit, from the initial planning stages through the evaluation of the audit results. The proposals build on the existing framework for risk assessment by, among other things, taking account of improvements in risk assessment methodologies, enhancing the integration of the risk assessment standards with the board’s standard for the audit of internal control over financial reporting, emphasizing the auditor’s responsibilities for considering the risk of fraud as being a central part of the audit process, and reducing unnecessary differences with the risk assessment standards issued by the other standard setters.
The PCAOB’s proposed risk assessment standards generally are consistent with the ASB’s risk assessment standards. Where differences exist, they are generally due to the PCAOB’s moving fraud risk procedures from SAS no. 99, Consideration of Fraud in a Financial Statement Audit, into the risk standards and addressing integrated audits, a requirement that applies only to certain public companies.
Comments are due Feb. 18. The proposing release, text of the proposed auditing standards, and related amendments to PCAOB standards are available at www.pcaobus.org under Rulemaking Docket no. 026.