Public Company Accounting Oversight Board Accepts New Audit Standard

The PCAOB has recently accepted Auditing Standards No.16-‘Communications with Audit Committees’ that lays down the requirements, which further enhance the timeliness and relevance of communications between the audit committee and the auditor. The Public Company Accounting Oversight Board has also accepted the amendments made to various other PCAOB accounting standards.

The auditing standard, regarding which PCAOB had given proposals on the 29^th of March 2010, and had proposed the same again on 20^th of December 2011 after a roundtable meeting and comment letters, has been basically designed to encourage a dialogue process between the auditing committee and the auditor on matters pertaining to financial statement and audit.

James R. Doty, Chairman of PCAOB stated that communication between the auditing committee and auditors enhances the audit quality, whereas the final auditing standard improves the communication relevance and quality.

The Auditing Standard takes over PCAOB’s interim audit standards AU Sec.310-Appointment of the Independent Auditor as well as AU Sec. 380, Communication with Audit Committees. In addition to this, it also amends PCAOB’s other standards.

Martin F. Baumann, PCAOB’s chief auditor and professional standards director pointed out that the Auditing Standard will enhance the quality of audit. It lays stress on communication supported by both the sides, on issues such as essential accounting related estimates, risks, contentious or difficult matters and extraordinary transactions.

Like all the new audit standards as well as amendments to accounting standards that are accepted by the Public Company Accounting Oversight Board, even this particular new auditing standard as well as amendments that were related to it have been put up before the SEC in order to acquire its approval. If Securities and Exchange Commission approves these changes, then they will come into effect for public company auditing of fiscal durations commencing after 15^th of December 2012. As per the Jumpstart Our Business Startups Act of 2012, the audit standard as well as the amendments that are related to it will be applicable on the audits of “emerging growth companies” only when the Securities and Exchange agrees to it.

The final auditing standard as well as the statements made during the open discussion meeting can be accessed on PCAOB’s website.