Testimony Concerning Accounting and Auditing Standards: Pending Proposals and Emerging Issues

Appendix A

Standing Advisory Group Meeting
OCA Current Standard-Setting Agenda
April 7-8, 2010

The table, followed by a brief project overview, presents the Office of the Chief Auditor's ("OCA") current standard-setting agenda with key milestones. Project milestones have been developed for planning and budgeting purposes and may change due to a variety of reasons. Specifically, the projected project milestones are contingent on the Board determining that the staff should pursue a standard-setting project in each area. If the Board determines to issue a concept release for public comment before proposing a standard, the Board will analyze the comments received and determine if it is appropriate to proceed with a proposed standard. Additionally, after the Board receives public comment on a proposed standard the Board will determine whether to adopt a final standard or seek additional comment through re-proposal. Finally, emerging issues, new accounting developments, and any new legislative initiatives could impact the projected milestones or could result in other priorities not on the agenda.

*The projected project milestones are contingent on the Board determining that the staff should pursue a standard-setting project in each area.  If the Board determines to issue a concept release for public comment before proposing a standard, the Board will analyze the comments received and determine if it is appropriate to proceed with a proposed standard.  Additionally, after the Board receives public comment on a proposed standard the Board will determine whether to adopt a final standard or seek additional comment through re-proposal.  Finally, emerging issues, new accounting developments, and any new legislative initiatives could impact the projected milestones or could result in other priorities not on the agenda.

Standards-setting Brief Project Overview

1. Risk Assessment – The Board re-proposed the standards for public comment on December 17, 2009. The comment period ended on March 2, 2010. The staff is analyzing the comments received and will discuss with the Board its views on how to address the comments.
   
2. Communications with Audit Committees – The Board proposed the auditing standard for public comment on March 29, 2010. Comments are due on May 28, 2010.
   
3. Audit Confirmations – In response to the comments received on the May 29, 2009 concept release, the staff is evaluating potential revisions to the audit confirmations auditing standard.
   
4. Signing the Auditor's Report (Advisory Committee on the Auditing Profession to the U.S. Department of Treasury ("ACAP") Recommendation Firm Structure and Finance Recommendation No. 6) – It was recommended that the PCAOB "[u]ndertake a standard-setting initiative to consider mandating the engagement partner's signature on the auditor's report." – The staff is analyzing the comments received on the July 28, 2009 concept release and is discussing with the Board the staff's views on how to address the comments.
   
5. Application of the Sarbanes-Oxley Act's Provision on "Failure to Supervise" – The staff is currently preparing a draft release for the Board's consideration relating to the Board's application of Section 105(c)(6) of the Act, which authorizes the Board to impose sanctions on firms and individuals for failure to supervise. The release would also seek comment on concepts relating to what, if any, rulemaking or standard-setting might usefully supplement the Board's application of that provision.
   
6. Related Parties – In response to comments received at the October 14-15, 2009 SAG meeting, the staff is evaluating potential revisions to the related parties auditing standard.
   
7. Specialists – In response to the comments received at the October 14-15, 2009 SAG meeting, the staff is evaluating potential revisions to the specialist auditing standard.
   
8. Fair Value Measurements and Other Accounting Estimates – In response to the comments received at the October 14-15, 2009 SAG meeting, the staff is evaluating potential revisions to the standards on fair value measurements and other accounting estimates.
   
9. Principal Auditor / Multi-Location Audits – The staff is evaluating potential revisions to the principal auditor auditing standard. The staff will discuss this topic with the Standing Advisory Group at the April 7-8, 2010 meeting.
   
10. Quality Control Standards, Including Quality Control Over the Work of Affiliated Firms – The staff is evaluating potential revisions to the quality control standards. This will include an evaluation of Appendix K.
    
11. Applicability of SECPS Requirements to all Registered Firms – Because registered firms (generally non-U.S. firms and some smaller firms) that were not members of the SECPS in April 2003 when the Board adopted certain of the SECPS requirements are not subject to these interim quality control requirements, the staff is analyzing different options to determine if it is feasible to extend the SECPS requirements to all registered firms. This excludes Appendices E (superseded by AS No. 7) and K (part of global quality control standards standards-setting project).
    
12. Going Concern – The staff is monitoring FASB's project and plans to update the timeline when the FASB determines their action plan for the accounting standard. OCA will assess if any conforming amendments are needed to the Board's auditing standards to align with the FASB's final standard. The staff will also evaluate any additional issues and determine whether to pursue a standard-setting project on going concern.
    
13. Subsequent Events – The staff is evaluating potential revisions to the subsequent events auditing standard in light of FASB's new accounting standard on subsequent events.

Other Projects

OCA is also considering the following recommendations relating to standards-setting from the Advisory Committee on the Auditing Profession to the U.S. Department of Treasury ("ACAP") and the Advisory Committee on Improvements to Financial Reporting to the U.S. Securities and Exchange Commission ("CiFIR")[1] –

• ACAP Concentration and Competition Recommendation No. 4(a) – Compile the SEC and PCAOB independence requirements into a single document and make this document website accessible.
  
• ACAP, Firm Structure and Finance Recommendation No. 5 – Urge the PCAOB to undertake a standard-setting initiative to consider improvements to the auditor's standard reporting model. Further, urge that the PCAOB and the SEC clarify in the auditor's report the auditor's role in detecting fraud under current auditing standards and further that the PCAOB periodically review and update these standards. The staff will discuss this topic with the Standing Advisory Group at the April 7-8, 2010 meeting.
  
• CIFiR Recommendation III.E, Clarifying Guidance on Financial Restatements and Accounting Judgments – In recognition of the increasing exercise of accounting and audit judgments, we recommend that the SEC and PCAOB adopt policy statements on this subject.

Interim Professional Auditing Standards adopted by the PCAOB in April 2003

Similar to past practice, OCA continually evaluates the Board's interim standards and takes a priority-based approach in determining which interim standards need to be amended. As part of developing the standards-setting priorities on an annual basis, OCA takes into consideration the results of the Board's oversight activities of registered accounting firms, the work of other standards setters (e.g. FASB, IAASB), advice from the Standing Advisory Group, emerging issues, research, and solicitation of public comments. The final set of priorities is determined based on the results of the PCAOB's oversight of registered public accounting firms, monitoring of the environment, and consultation with the Board's Standing Advisory Group, among other factors.

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The PCAOB is a private-sector, non-profit corporation, created by the Sarbanes-Oxley Act of 2002, to oversee the auditors of public companies in order to protect the interests of investors and further the public interest in the preparation of informative, fair, and independent audit reports.
 

Related Information

• Testimony