Standing Advisory Group Discusses Standards Priorities

The Public Company Accounting Oversight Board today sought the advice of its Standing Advisory Group on a series of topics for consideration as possible auditing and related professional practice standards.

“We rely on the Standing Advisory Group for advice and input to assist the PCAOB in prioritizing standards-setting activities,” said Chief Auditor Douglas R. Carmichael.

“As was the case in 2005, we do not anticipate that all of the projects will be completed in 2006 as final standards of the Board,” Carmichael said. “Rather, several of these projects may result in proposals for public comment sometime during the year, and we expect to continue to work on the others internally. Additionally, the activities could change based on emerging issues that may arise during the year.

“Our list of proposed priorities does not include work on implementation of recent standards, but I would be remiss if I didn’t mention the significant effort we have expended and will continue to expend to ensure as smooth an implementation of PCAOB Auditing Standard No. 2 as possible,” Carmichael said. “At the June meeting of the Standing Advisory Group, we committed to continuing our dialogue with auditors, issuers, investors, and others on implementation issues arising from our standard and Section 404 of the Sarbanes-Oxley Act. We also expressed our intent to obtain data from the inspections process, which we are now doing, and to communicate both directly to the firms and more generally to the public whether implementation to date has been as effective as it can be and, if not, how it can be made more effective. Those efforts will continue to be a priority of the Board and staff.”

Among the topics discussed by the advisory group:

• Engagement quality review;
• Fraud, including related parties and confirmations;
• Communications with audit committees;
• Principles of reporting, including the meaning of “present fairly in conformity with GAAP,” consistency of GAAP application, and adequacy of financial statement disclosure;
• Fair value, including the use of specialists;
• Risk assessment, including audit planning and procedures, and evaluating audit findings;
• Quality control, including independence quality controls; and
• Codification of PCAOB standards/authority of PCAOB interim standards.