A new study indicates that differences between the international and U.S. auditing standards are fairly negligible and wont present the challenge now facing the convergence of U.S. GAAP with International Financial Reporting Standards.
The study, prepared for the European Commission by the Maastricht Accounting, Auditing and Information Management Research Center, evaluated the differences between International Standards in Auditing and the standards of the U.S. Public Company Accounting Oversight Board. ISA has been updated and modernized recently by a clarification project and is now the subject of a public consultation by the European Commission on the standards adoption in European Union member states. The Maastricht study is expected to help advance that effort.
This is an important study, and its independence is a key factor, said David York, head of the auditing practice at the Association of Chartered Certified Accountants, in a statement. Comparing the U.S. system with that proposed for Europe is a timely exercise that also holds lessons for governments, regulators and investors.
The study concludes that there is little or no difference between audits under the clarified ISA and PCAOB standards, he noted. York believes this will increasingly be the case in the future as the PCAOB is proposing to change its standards on the auditors assessment of and response to risk, essentially to catch up with the risk-driven, principles-based ISA.
However, there will remain significant differences because of Sarbanes-Oxley requirements for separate reporting by auditors on internal control over financial reporting.
The report confirms that investors are in favor of one set of auditing standards that are followed on a global basis, so it will be interesting to see the reaction to the study in the U.S., said York. The report also makes the significant point that auditing standards are just one element. Audit quality depends on how they are applied by firms and enforced by regulators.
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