The Public Company Accounting Oversight Board plans to turn its attention to auditing standards involving revenue recognition, according to one of the PCAOB members.
Speaking at the Brigham Young University Accountancy Alumni Conference in Provo, Utah, on Monday, PCAOB member Jay Hanson told the audience about the board’s plans.
“Another audit area that we will need to turn to in the near future, although it is not yet on our standard setting agenda, is auditing revenue,” he said. “Revenue is probably the most important number on the financial statements for most investors, and it is one in which our inspectors frequently find problems. Revenue recognition also is a complex accounting area.”
Hanson noted that the Financial Accounting Standards Board and the International Accounting Standards Board are working on a joint project to issue updated standards that will fundamentally change the basis for revenue recognition. “We are monitoring the development of these new accounting standards,” he added. “It is my hope that the PCAOB will soon devote substantial resources to an audit standard project in this area, and that we will be able to issue a proposal on auditing revenue with sufficient lead time to allow new accounting and auditing standards to become effective at or around the same time.”
Hanson also discussed the challenges facing audit firms today. “The auditing profession faces many challenges, including keeping investor interests first, attracting and retaining talent, the need to perform high quality audits, and providing appropriate work-life balance,” he said. “I am directly asking firm leaders what they are doing to ensure their audit teams have the resources to perform a quality audit. An overworked and exhausted audit staff, manager or partner cannot perform the job investors and audit committees expect.”