PCAOB Publishes Staff Audit Practice Alert on Auditing the New Accounting Standard for Revenue
The Public Company Accounting Oversight Board today published a staff audit practice alert to assist auditors in applying PCAOB standards when auditing companies' implementation of the new revenue accounting standard from the Financial Accounting Standards Board.
"We are publishing this alert to help auditors apply relevant PCAOB requirements in upcoming interim reviews and year-end audits," said Martin F. Baumann, PCAOB Chief Auditor and Director of Professional Standards.
"We have been monitoring implementation of this standard, and we've heard from a number of interested parties, including the PCAOB Standing Advisory Group, that guidance on auditing revenue would be helpful," he added.
"Staff Audit Practice Alert No. 15: Matters Related to Auditing Revenue from Contracts with Customers,” highlights PCAOB requirements and other considerations for audits of a company's implementation of the new revenue accounting standard, including:
- Transition disclosures and transition adjustments
- Internal control over financial reporting
- Fraud risks
- Revenue recognition
The FASB adopted a new accounting standard, "Revenue from Contracts with Customers," in May 2014. As companies implement the new revenue standard, they may need to change their systems, processes, and controls, or to develop new ones. Done poorly, such changes could pose heightened risks of material misstatement, including fraud risks.
The PCAOB will continue to monitor the auditing of revenue as part of its ongoing oversight activities.