The Public Company Accounting Oversight Board on Wednesday adopted Auditing Standard No. 16, Communications with Audit Committees, which establishes requirements that enhance the relevance and timeliness of communications between the auditor and audit committee, in addition to amendments to other PCAOB standards.
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The standard, initially proposed by the board on March 29, 2010, and re-proposed Dec. 20, 2011, in response to comment letters and a roundtable, is intended to foster constructive dialogue between the auditor and audit committee 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 PCAOB Chairman James R. Doty in a statement.
The standard superseded the board’s interim auditing standards AU Sec. 310, Appointment of the Independent Auditor, and AU Sec. 380, Communication with Audit Committees, and amends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.
"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," stated Martin F. Baumann, PCAOB chief auditor and director of professional standards.
As with all new auditing standards and amendments to standards adopted by the PCAOB, this new standard and related amendments have been submitted to the Securities and Exchange Commission for approval. If approved, the changes 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.
The final rule and open meeting statements will be available on the PCAOB Web site under Rulemaking Docket No. 030, along with an archive of the board meeting webcast and podcast.