Oversight Board (PCAOB) expects to seek advice from its Standing
Advisory Group (SAG) on during the coming year will likely relate
to recommendations from two federal advisory committees that
recently concluded activities in the US.
The SAG was formed in 2003 to provide input and advice to the
PCAOB on its standard-setting activities. It recently announced the
new appointments and re-appointments for the 2009-2010 term.
The two federal advisory committees were the Securities and
Exchange Commission’s committee on improvements to financial
reporting and the US Treasury Department’s advisory committee on
the auditing profession.
“As we work though those recommendations, there will be aspects
of those that we will be seeking the advice from the Standing
Advisory Group on,” PCAOB chief auditor and director of
professional standards Thomas Ray said.
The board has already sought the SAG’s advice on two of the
recommendations in the Treasury committee report. One
recommendation was that the PCAOB consider whether it is feasible
to develop indicators of audit quality.
“We would expect that to be a pretty significant issue for the
PCAOB in the near term,” Ray said.
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The board also sought the group’s advice on the recommendation
that the PCAOB require the individual audit partner who is
responsible for an audit to personally sign his or her name on the
In October, the PCAOB held its annual SAG meeting, where it
sought the group’s input on its standard-setting activities for the
“They affirmed our view that we should be focused on standard
setting relating to the auditor’s assessment of and response to
risk, standards relating to fair value and use of specialists and
how to audit estimates in financial statements. Also, the use of
audit confirmations in the audit process as well as auditing
related parties and related party transactions,” Ray said.
As the PCAOB’s chief auditor and director of professional
standards, Ray expects much of his work in the year ahead will
involve focusing on the current economic conditions.
“We want to make sure we are aware and can anticipate the effect
of these conditions on auditors of public companies,” he said.
Another issue the board consulted the SAG on in the October
meeting was its view on the impact of current economic climate on
auditors of financial statements and whether the PCAOB should be
taking any actions.
“We did get some pretty strong advice from them that we should
consider issuing some additional guidance or some alert to auditors
to help them through this process. And that is something that is
under consideration at the board now,” Ray said.
The board’s staff have already issued two audit practice alerts
relating to the financial crisis. The most recent was last December
and dealt with auditing fair value measurement.
“What these do generally is highlight matters that are of
particular importance at the time, to help direct auditors to focus
their attention on areas where we see risk of financial statement
misstatement,” Ray said.