Fact Sheet: Adoption of Amendments on the Auditor’s Use of the Work of Specialists

December 20, 2018

The Public Company Accounting Oversight Board adopted amendments to its standards that are intended to strengthen the requirements that apply when auditors use the work of specialists in an audit.

For purposes of PCAOB standards, a specialist is a person or firm possessing special skill or knowledge in a particular field other than accounting or auditing.

Details of the Amendments

The Board is amending two existing auditing standards, AS 1105, Audit Evidence, and AS 1201, Supervision of the Audit Engagement. The Board is also retitling and replacing AS 1210, Using the Work of a Specialist, with a new AS 1210, Using the Work of an Auditor-Engaged Specialist.

These amendments strengthen existing requirements by:

For use of the work of a company's specialist:

  • Supplementing the requirements in AS 1105 for circumstances when the auditor uses the work of the company's specialist as audit evidence.
  • Aligning the requirements for using the work of a company's specialist with the risk assessment standards and the standard and related amendments adopted by the Board on auditing accounting estimates, including fair value measurements.
  • Setting forth factors for determining the necessary evidence to support the auditor's conclusion regarding a relevant assertion when using the work of a company's specialist.

For use of the work of an auditor's specialist:

  • Supplementing the requirements for applying the supervisory principles in AS 1201 to auditor-employed specialists, and extending those requirements to auditor-engaged specialists.
  • Adding requirements for informing the auditor's specialist of the work to be performed and for reviewing and evaluating that specialist's work.
  • Amending the requirements for assessing the knowledge, skill, and ability of an auditor-engaged specialist.
  • Amending the requirements for assessing the objectivity of an auditor-engaged specialist to describe objectivity as the ability to exercise impartial judgment on all issues encompassed by the specialist's work related to the audit and specify the auditor's obligations when the specialist or the entity that employs the specialist has a relationship with the company that affects the specialist's objectivity.

The amendments apply to audits conducted under PCAOB standards.

Effective Date

Subject to approval by the Securities and Exchange Commission, the amendments will take effect for audits of financial statements for fiscal years ending on or after December 15, 2020.

Background

Many companies employ or engage specialists to provide information used in the preparation of their financial statements. Auditors often use the work of company specialists as audit evidence. Auditors also may employ or engage their own specialists to assist in obtaining and evaluating audit evidence.

The Board also adopted a new standard on accounting estimates, including fair value measurements, that strengthens and enhances the requirements for auditing accounting estimates.

Project History

As part of the research and outreach leading up to the adoption of these amendments on the use of the work of specialists, the PCAOB:

  • Issued for public comment a staff consultation paper in May 2015.
  • Discussed the paper and public comments at meetings of the Standing Advisory Group in November 2016, June 2015, and November 2015, and at a meeting of the Investor Advisory Group in September 2015.
  • Issued for public comment a proposal on the auditor's use of the work of specialists in June 2017.
  • Discussed the proposal and public comments at a meeting of the Standing Advisory Group in November 2017.
  • Documents associated with this project can be found on the PCAOB website under Docket 044.