Washington (Sept. 30, 2003) – The Public Company Accounting Oversight Board moved a step closer to a final rule establishing standards for audit documentation during a free-wheeling "roundtable" meeting with representatives of major accounting firms, investor groups, and regulatory agencies in Washington Monday.
The new standards are required by provisions of the Sarbanes-Oxley Act which direct the board to adopt an audit documentation standard that will require auditors to prepare and maintain work papers and other materials in sufficient detail to support the conclusions of the audit.
During the meeting, which attracted over 20 invited participants from the public and private sector, representatives from several major accounting firms conceded the need for PCAOB to issue national standards governing audit documentation, but urged the board to avoid overly burdensome new rules.
Noting that some large corporate audits can take 2000 hours to complete, Crowe Chizek’s James L. Brown expressed concerns that an overreaching regulation could effectively require auditors to document everything they’ve done and everyone they’ve talked to on the job for the past year.
"We’re all in favor of documentation, but how far do you want to go," he asked PCAOB officials at the meeting. "Some of this could be carried to an extreme."
A key issue examined during the roundtable meeting was whether PCAOB’s new standards should require that audit documentation "contain sufficient information to determine who performed the work and the date such work was completed, as well as the person who reviewed the work and the date of such review."
McGladrey & Pullen’s Bruce P. Webb told the board that few if any accounting firms would object to such disclosure standards "in theory," but he warned that in practice it would be difficult to place a completion date on audit work papers.
Craig W. Crawford of KPMG said that it is "entirely appropriate" to expect audit work papers to indicate who did the work and when, but he urged the board to provide accountants with some flexibility to update and review the work papers because audits are an ongoing process.
Government regulators, however, took a harder position on that issue, urging PCAOB to press forward with strict new disclosure requirements for audit documentation.
In discussing whether all audit work papers should be dated and signed by both the accountant who performed the work and the supervisor who reviewed that work, Susan Markel, Chief Accountant for the Securities and Exchange Commission’s Division of Enforcement told PCAOB: "I view this question as having a simple answer and that answer is yes."
-- Ken Rankin
