Statement on the Proposed Framework for Reorganization of PCAOB Auditing Standards

I support the issuance of today's release of a proposed framework for reorganizing the Board's interim standards and its PCAOB-issued auditing standards. This is a first step in moving toward a single, integrated body of PCAOB auditing standards. Today's proposal uses a framework and approach intended to facilitate practitioners' ease of use of the standards, as well as establish the structure and framework for future updates.

The Sarbanes-Oxley Act requires the Board to, among other things, establish auditing and related professional standards for auditors of U.S. issuers that may be "necessary or appropriate in the public interest or for the protection of investors."^[1] The Act gave the Board authority to establish these standards through the adoption and modification of interim transitional standards as well as the adoption and modification of other standards as may be required.^[2]

Establishing high quality auditing standards and ensuring their effective implementation by public accounting firms around the world through the Board's registration, inspection, enforcement, and other programs are the core of PCAOB's mission of protecting investors and the public interest. Since April 2003, the Board has adopted, modified, and superseded interim standards as well as PCAOB-issued standards.

This reorganization proposal seeks to eliminate the notion of "interim" standards — which are the standards that the Board adopted 10 years ago. In April 2003, the Board adopted, on an interim transitional basis, generally accepted auditing standards of the Auditing Standards Board (ASB) of the American Institute of Certified Public Accountants (AICPA) that were in existence at that time.^[3] For those "interim auditing standards," the Board retained the organization and reference numbers ("AU" sections) used in the ASB's codification of its standards at that time, which the ASB has since revised.

Since the Board's adoption of the interim standards in 2003, the Board has issued 16 new standards that have superseded and/or amended many of the interim standards. Those 16 standards are numbered sequentially based on the order in which they were issued (AS Nos. 1-16).

Today's proposed framework for reorganization of PCAOB auditing standards and related amendments^[4] involves developing an approach to integrating and reorganizing the interim auditing standards (referred to as "AU") with the auditing standards issued by the Board (referred to as "AS") under a single, integrated numbering system. The Board will separately propose and issue for comment the renumbered and reorganized standards after considering comments on this proposed framework.

Today's proposed framework is intended to enhance the usability of the Board's auditing standards by making it easier for users to navigate the standards and to compare them to other auditing standards, such as those issued by the International Auditing and Assurance Standards Board (IAASB) and the AICPA. The numbering system used by the proposed framework is intended to follow the logical flow of the auditing process.

Also, in conjunction with the proposed reorganization of PCAOB auditing standards, the Board is proposing related amendments, including rescinding certain auditing standards that it believes are obsolete or not applicable to audits of issuers.

It is important to note that this proposal does not include redrafting the auditing standards or making substantive changes to the requirements of the standards. The changes resulting from the proposed reorganization are not expected to impose new requirements on auditors or substantively change the requirements of PCAOB standards. The Board will continue to review and consider changes to the content of individual standards in separate standard-setting projects.

I encourage interested parties to comment on alternative approaches for reorganizing PCAOB's auditing standards that we should consider, and also on any advantages or disadvantages of the proposed approach and the various alternatives.

When implemented, the final reorganized and renumbered standards will form the basis for a functioning online version of PCAOB's auditing standards. I encourage interested parties to provide comments that consider ways that we can build tools for online, electronic access to the standards that facilitate ease of use and navigation of the standards, as well as comparisons to other major sets of auditing standards.

I also encourage commenters to tell us whether the Board should consider rescinding other interim standards as part of this project or a future project.

Finally, I welcome commenters' views on the implementation of the proposed framework for reorganization, as well as any additional steps that the Board may want to consider, either as part of this project or in future projects.

I would like to thank the staff of Office of the Chief Auditor for their excellent work on this project, particularly Keith Wilson, Robert Ravas, and Kimberly Kolar.