SEC Commissioner Paul Atkins told U.S. business leaders in Japan that a recently issued auditing standard should have the effect of cutting audit fees.
"If auditing fees do not come down as a result of these changes, then something is terribly wrong with the interpretation of Audit Standard 5 and perhaps with the competitive landscape in the auditing profession itself," said Atkins, in a speech before the American Chamber of Commerce in Japan, last week.
In July, the Securities and Exchange Commission approved the Public Company Accounting Oversight Board's risk-based AS5 standard, replacing the older AS2, which companies had complained was unnecessarily time-consuming and inefficient. Atkins expects the new standard to force changes on auditors as they try to comply with the Sarbanes-Oxley Act's Section 404 requirements on auditing companies' internal controls.
"Auditors need to change their approach in response to the new standard," he said. "The PCAOB needs to inspect with an eye toward ensuring that auditors are applying the new standard properly. The SEC, in turn, should keep a close eye on [the] PCAOB and whether the Section 404 reforms are working."
Atkins hopes that issuers, auditors and regulators will properly utilize the improvements, which he expects will enhance the regulatory environment for publicly held companies.
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