The Public Company Accounting Oversight Board adopted a new auditing standard Tuesday, along with amendments to other auditing standards, to require auditors to pay more attention to three critical areas of the audit: related-party transactions, significant unusual transactions, and a company’s financial relationships and transactions with its executive officers.
The PCAOB said it took the action Tuesday because these transactions and relationships could pose an increased risk of material misstatement in company financial statements. The board determined that its existing requirements in these critical areas do not contain sufficient required procedures and are not sufficiently risk-based. In addition, the board's inspection and enforcement activities indicate that there are continuing weaknesses in auditors' scrutiny in these areas.
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