On December 17, 2012, the SEC approved the new Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 16, Communications with Audit Committees. The new standard seeks to improve the audit process by enhancing the relevance and effectiveness of communications between outside auditors and audit committees (for more on the new standard, see Legal Update, PCAOB Adopts Auditing Standard on Communications with Audit Committees). The new standard supersedes PCAOB interim standards AU sec. 380, Communication with Audit Committees and AU sec. 310, Appointment of the Independent Auditor and amends certain other interim standards.

The new standard is effective for audits of financial statements with fiscal years beginning on or after December 15, 2012.

Under Section 103(a)(3)(C) of the Sarbanes-Oxley Act (as amended by Section 104 of the JOBS Act), any rules adopted by the PCAOB after April 5, 2012 do not apply to the audits of emerging growth companies (EGCs) unless the SEC determines the new rules are necessary or appropriate in the public interest. The SEC approved the PCAOB's request that the new standard apply to EGCs.

The SEC's approval order also clarified that the new standard will apply to foreign private issuers (FPIs) because under the Sarbanes-Oxley Act, the PCAOB's auditing and other professional standards apply to audits of issuers, with no exception for issuers that are FPIs.