PCAOB Revises Audit Risk Assessment Proposals

The Public Company Accounting Oversight Board has decided to re-propose seven auditing standards and amendments that would change the requirements for assessing audit risks.

The PCAOB had initially proposed the standards in October 2008, but has revised them in response to the comments it received and again opened them for comment (see PCAOB Proposes Standards for Audit Risk and PCAOB to Consider Re-proposal on Risk Assessment Standards). Like the original proposal, the re-proposed standards would establish requirements for procedures performed throughout an audit, from the initial planning stages through the evaluation of the audit results to form the opinion in the auditor's report.

The re-proposed standards aim to enhance the effectiveness of an auditor’s assessment and response to risk. The re-proposed standards emphasize the auditor’s responsibility to consider the risk of fraud throughout an audit and contain new requirements intended to improve an auditor’s evaluation of disclosures in financial statements. 

“A sound and sophisticated risk assessment is essential to performing an audit that affords investors reasonable assurance that financial statements are free of material error,” said acting PCAOB chairman Daniel L. Goelzer in a statement. “These seven standards – once finalized – will serve as the bedrock for much of the board’s future standard-setting.”

The PCAOB is seeking comments on the latest versions of the proposed standards until March 2, 2010. For more information, visit www.pcaobus.org.