It should come as no surprise to any professional person that auditing literature is extensive. This reflects the evolution of business processes, globalization of economies, technological changes. The current PCAOB standards include both interim standards (the "AU" standards, which have accreted over time, as written by the profession) and 16 additional standards, promulgated by the PCAOB (the "AS" standards). As printed, these standards run to over 2,000 pages. To navigate these standards can, we are told, prove daunting.
The auditing standards are the "auditors' charter" — the source of both the auditors' responsibilities and their authority. That makes it essential that the auditing standards be usable, accessible, and that the organization and layout of the standards make sense. They align with how an audit is performed.
Today's proposed "Framework for Reorganization" is meant to address that priority. The proposal creates no new performance obligation. The release includes an initial analysis of potential economic implications for emerging growth companies, and solicits information to assist the Board in this effort.
The proposal also would provide a "crosswalk" to the preexisting interim (or "AU") standards and to the more recent international standards of auditing of the IAASB (another 1,000 pages that auditors must be able to use).
Thus, the proposed "Framework for Reorganization" shows the context in which it is being proposed. The questions accompanying the release solicit more information on all these topics.
This release represents an important first step in making the PCAOB standards more available to auditors. As a reorganization, the project I hope we will commence today has an honorable lineage, going back to codifications deriving from the ancients and found in our own legal system. Codifications of rules that have accumulated over time — and reorganizations of those rules to reflect their order and the rationality of their policies — are activities that are as old as civilization and the rule of law.
I shall stop there, and won't suggest this reorganization project will rival the Code of Hammurabi or Charlemagne's codifications. It is a start on making our standards more usable, more accessible, and more clearly aligned with the audit process. If more auditors find it easier to read the PCAOB standards and to consult them more frequently, this "Framework for Reorganization" will have fulfilled an important purpose.