Final versions of standards for specialists, accounting estimates may be ready by year-end

The Public Company Accounting Oversight Board (PCAOB) said it hopes to complete its planned standards for accounting estimates and the use of specialists by the fourth quarter, according to the most recent standard-setting agenda published on July 9, 2018.

The audit regulator’s staff has analyzed the comments submitted in response to the proposed versions of each standard and is working on recommendations for the final amendments, the PCAOB said. The proposals were released in June 2017 in Release No. 2017-002, Proposed Auditing Standard—Auditing Accounting Estimates, Including Fair Value Measurements and Proposed Amendments to PCAOB Auditing Standards, and Release No. 2017-003, Proposed Amendments to Auditing Standards for Auditor’s Use of the Work of Specialists. The comment periods ended in August 2017.

The staff is continuing to determine the next steps for a proposal that would strengthen the requirements for a lead audit firm that supervises other accounting firms that work on an audit. In September 2017, the board issued Release No. 2017-005, Supplemental Request For Comment: Proposed Amendments Relating to the Supervision of Audits Involving Other Auditors and Proposed Auditing Standard—Dividing Responsibility for the Audit With Another Accounting Firm, to seek additional comments for a proposal from 2016. The PCAOB said it is continuing to analyze the comments submitted in response to the supplemental request.

The last project on the PCAOB’s standard-setting agenda deals with the auditor’s evaluation of a company’s ability to continue as a going concern. The PCAOB staff has been assessing for the past few years the implementation of the Financial Accounting Standards Board’s (FASB) 2014 Accounting Standards Update (ASU) No. 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern, which requires management to evaluate a company’s ability to remain financial viable. Now the PCAOB staff is evaluating how the implementation of ASU No. 2014-15 may be affecting application of guidance such as Auditing Standard (AS) 2415, Consideration of an Entity's Ability to Continue as a Going Concern, and Staff Audit Practice Alert (APA) No. 13, Matters Related to the Auditor's Consideration of a Company's Ability to Continue as a Going Concern.

The audit regulatory board is also conducting research on five issues that may develop into standard-setting projects. The issues include the quality control standards involving an accounting firm’s supervision of its partners and employees. A second item on the research agenda concerns how technological developments are affecting audit work, while the third project involves the use of non-generally accepted accounting principles (GAAP) measurements and other types of information that typically falls outside a set of financial statements.

The staff is developing recommendations for the board’s consideration about the quality control standards, non-GAAP measurements and a project concerning legal and regulatory violations. The board is still consulting with a task force from its Standing Advisory Group (SAG) about its next move with regard to technology’s effect on audit work.

The board is also researching whether it needs to amend Rule 3526, Communication With Audit Committees Concerning Independence. PCAOB inspectors have in recent years identified a number of concerns with compliance with Rule 3526, and the regulatory board’s staff has been evaluating the issue.

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