PCAOB plans vote on audit report changes
The Public Company Accounting Oversight Board is planning to hold an open meeting next Thursday, June 1, to consider adopting a long-discussed set of changes to the auditor’s reporting model.
In addition to adopting a new standard that would provide more information in the audit report, the PCAOB also plans to consider proposing amendments to standards to strengthen and improve the requirements for auditing accounting estimates, including fair value measurements, and using the work of specialists in an audit.
The proposed auditor’s reporting standard would retain the existing pass/fail model currently used in audit reports. That model has generally been acknowledged as a useful signal as to whether the audited financial statements are presented fairly, the PCAOB noted. However, the PCAOB also wants to provide more information to investors and other users of financial statements by improving the audit report’s form and content to make it more relevant and informative.
The new report would include a description of "critical audit matters" to provide information about particularly challenging, subjective or complex aspects of the audit related to financial statement accounts and disclosures. The PCAOB originally issued a concept release back in 2011 proposing some changes. After receiving feedback, it proposed a rule in 2013 and after receiving further comments, issued a re-proposed rule last year.
The proposals for amending the standards for auditing accounting estimates and fair value measurements aim to resolve problems identified by the PCAOB during its inspections of auditing firms. The PCAOB noted there have been changes in the financial reporting frameworks related to accounting estimates, including fair value measurements, and changes in the methods used, including growing reliance on the work of third parties and pricing desks at some firms. Auditors have also expressed concerns about inconsistencies in the existing standards.
The proposed amendments on using the work of specialists in audits involve beefing up the requirements in the PCAOB’s existing auditing standards for overseeing the work of specialists, such as valuation specialists, appraiser and actuaries, as well as evaluating their objectivity.
The PCAOB plans to webcast next Thursday's meeting starting at 2:30 PM Eastern Time.