The Public Company Accounting Oversight Board has proposed an auditing standard on Communications with Audit Committees, and a series of related amendments to interim standards.
The proposal addresses requirements for auditors to communicate with audit committees of public company boards of directors, and considers a number of factors, including the importance of accounting judgments and estimates in financial reporting.
The proposed standard on audit committee communications is intended to enhance the relevance and effectiveness of the communications between an auditor and audit committee throughout the course of an engagement, said PCAOB acting chairman Daniel L. Goelzer in a statement.
The proposed standard includes a requirement for auditors to establish a mutual understanding of the terms of the audit engagement with the audit committee and to document that understanding in an engagement letter.
The proposal also includes requirements relating to:
Communication of an overview of the audit strategy, including a discussion of significant risks, the use of the internal audit function; and the roles, responsibilities, and location of firms participating in the audit;
Communication regarding critical accounting polices, practices, and estimates;
Communication regarding the auditors evaluation of a companys ability to continue as a going concern; and,
Evaluation by the auditor of the adequacy of the two-way communications.
Comments on the proposed standard and amendments are due May 27, 2010. For more information, visit www.pcaobus.org.
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