PCAOB Proposes Standards for Audit Risk

The Public Company Accounting Oversight Board has voted to propose seven new auditing standards related to risk assessment.

The proposed 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 would establish requirements and provide direction on audit procedures, from the initial planning stages through the evaluation of the audit results. "An appropriate assessment of risk is the foundation of a high-quality audit," said PCAOB Chairman Mark Olson in a statement.

The proposed standards cover the auditor's responsibilities for reducing audit risk to an appropriately low level, audit planning and supervision, identifying and assessing the risks of a material misstatement, responding to the risks of a material misstatement, evaluating audit results, considering materiality in planning and performing an audit, and determining the sufficiency of audit evidence. The PCAOB is providing a 120-day comment period, ending Feb. 18, 2009.