PCAOB Proposes to Strengthen Requirements for an Auditor’s Use of the Work of Specialists

The Public Company Accounting Oversight Board today issued for public comment a proposal to strengthen requirements that would apply when auditors use the work of specialists in an audit.

The Board requests public comment on its proposal by August 30, 2017.

"Auditors use the work of specialists in important areas of the audit," said PCAOB Chairman James R. Doty. "Investors rely on auditors to carefully evaluate specialists' work."

The proposal is intended to further investor protection by strengthening the requirements for evaluating the work of a specialist employed or engaged by the company and applying a risk-based approach to supervising and evaluating the work of a specialist employed or engaged by the auditor.

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

The Board is proposing to amend two existing standards, Audit Evidence (AS 1105) and Supervision of the Audit Engagement (AS 1201), and replace and retitle one PCAOB standard, Using the Work of a Specialist (AS 1210).

"This proposal establishes a logical, risk-based approach to using the work of company specialists and auditor specialists," said Martin F. Baumann, PCAOB Chief Auditor and Director of Professional Standards. "It is an appropriate complement to our proposal to enhance the requirements for auditing accounting estimates, including fair value measurements."

The use of specialists has grown in both frequency and significance as the use of fair value measurements and other accounting estimates has increased. In a companion release, the PCAOB is proposing to replace its existing standards on auditing accounting estimates and fair value measurements with a single standard that establishes a uniform, risk-based approach to auditing accounting estimates, including fair value measurements.

The Board's proposal was informed by, among other things, comments received on a staff consultation paper and discussions during meetings of the PCAOB Standing Advisory Group and PCAOB Investor Advisory Group.

A fact sheet on the proposal also is available.