PCAOB Adopts New Auditing Standard
The Public Company Accounting Oversight Board has adopted Auditing Standard No. 16, Communications with Audit Committees, and amendments to other PCAOB standards.
The standard requires enhanced relevance and timeliness of the communications between the auditor and the audit committee, and is intended to foster constructive dialogue between the two on significant audit and financial statement matters.
“Open lines of communication between auditors and audit committees improve the quality of audits, and the final standard enhances the quality and relevance of those communications,” said James R. Doty, PCAOB Chairman.
The Board initially proposed the standard on March 29, 2010, and reproposed the standard on Dec. 20, 2011. The proposed standard was revised in response to comments received in comment letters and at a roundtable on Sept. 21, 2010.
“The standard on communications with audit committees will improve audit quality. It emphasizes effective two-way communication on matters of great importance to the audit and the financial statements, such as significant risks, critical accounting estimates, difficult or contentious matters, significant unusual transactions, and going concern,” said Martin F. Baumann, PCAOB chief auditor and director of Professional Standards.
The standard supersedes the Board’s interim auditing standards AU sec. 310, Appointment of the Independent Auditor, and AU sec. 380, Communication with Audit Committees, and amends other PCAOB standards.
All new auditing standards and amendments to PCAOB standards adopted by the Board are submitted to the Securities and Exchange Commission for approval.
The new standard and related amendments, if approved by the SEC, will be effective for public company audits of fiscal periods beginning after Dec. 15, 2012. Under the Jumpstart Our Business Startups Act of 2012, the standard and related amendments will apply to audits of “emerging growth companies” if the SEC makes a determination called for under that Act.