Audit PCOAB Overview

PCAOB Foundation and Auditing Standards

Created in 2003 with the Sarbanes Oxley Act

standards: general principles/responsibilities, planning/risk assessment, performing the audit, reporting, quality control

PCAOB General Principles

Auditor responsibilities

Auditor independence

Due professional care

Supervision

Professional skepticism

Planning and risk assessment

Audit planning, risk assessment, internal control over financial reporting (ICFR)

Performing the audit

Audit evidence, audit procedures, materiality

Reporting

Auditor’s report

Communication with audit committee

US standards don’t require auditors to rotate, but could be concerns if auditing firm for 50+ years, have to disclose how long firm has been auditor

Quality Control

firm-wide policies

key elements of quality control systems

New quality control standard

PCAOB Inspection Audit Failure finds

Most do not result in restatements

Failure rate decreasing (big 4 firms have invested in this)

Not satisfied with the level of professional skepticism (to many auditors believe management)

Most relate to complex valuations, inappropriate analytical procedures, and reliance on controls

Current Trends

Current rules require partner rotation

Boards change when new SEC

Has been proposals to eliminate PCAOB and absolve into gov entity