PCAOB Reproposes Auditing Standards on Communications With Audit Committees | Practical Law

PCAOB Reproposes Auditing Standards on Communications With Audit Committees | Practical Law

The Public Company Accounting Oversight Board (PCAOB) reproposed for comment an auditing standard on communications between outside auditors and audit committees and other amendments to PCAOB standards. The reproposed new standard seeks to enhance the relevance and effectiveness of communications between auditors and audit committees. 

PCAOB Reproposes Auditing Standards on Communications With Audit Committees

Practical Law Legal Update 8-517-0069 (Approx. 3 pages)

PCAOB Reproposes Auditing Standards on Communications With Audit Committees

by PLC Corporate & Securities
Published on 21 Dec 2011 • USA (National/Federal)
The Public Company Accounting Oversight Board (PCAOB) reproposed for comment an auditing standard on communications between outside auditors and audit committees and other amendments to PCAOB standards. The reproposed new standard seeks to enhance the relevance and effectiveness of communications between auditors and audit committees.
On December 20, 2011, the Public Company Accounting Oversight Board (PCAOB) reproposed for comment an auditing standard on communications between outside auditors and audit committees and other amendments to PCAOB standards. The reproposed new standard seeks to enhance the relevance and effectiveness of communications between auditors and audit committees.
The standard was originally proposed on March 29, 2010 (see Legal Update, PCAOB Releases Proposed Auditing Standard on Communications with Audit Committees). The standard is being reproposed to:
  • Better align the communication requirements with performance requirements in other PCAOB standards, including the implementation of the risk assessment standards that became effective in December 2010 (see Legal Update, PCAOB Adopts New Auditing Standards on Risk Assessment).
  • Extend its coverage to audits of SEC-registered brokers and dealers, under new authority granted to the PCAOB by Section 982 of the Dodd-Frank Act.
  • Include changes made in response to comments received on the original proposal and other refinements. Changes from the original proposal include:
    • adding a new requirement that the auditor communicate with the audit committee regarding significant transactions not in the ordinary course of business or that otherwise appear to be unusual and explain the auditor's understanding of the business rationale for those transactions; and
    • eliminating a previously proposed requirement that the auditor evaluate the adequacy of the two-way communications between the auditor and the audit committee.
The reproposed standard would supersede PCAOB interim standards AU sec. 380, Communication With Audit Committees, and AU sec. 310, Appointment of the Independent Auditor, and amend other interim standards. The PCAOB is accepting comments on the reproposed standard until February 29, 2012. The PCAOB anticipates that, subject to SEC approval, new standards would be applicable to audits beginning after December 15, 2012.