PCAOB Announces Ambitious Agenda

Yesterday, PCAOB Acting Chairman Dan Goelzer told the PCAOB's Standing Advisory Group: "We are embarking on a new phase in standard-setting, [with] a very ambitious standard-setting agenda in the coming year, focusing on some nuts and bolts issues, particularly issues our inspection program has highlighted where standards could be improved or modernized." He added, "In the coming months, we are likely to see more activity with more impact on financial statement auditing than any similar period in the board's existence."

Marty Baumann, Chief Auditor of the PCAOB, reviewed the PCAOB's recent standard-setting activities, including proposed standards, Concept Releases, and final standards issued Oct. 2008-2009. The PCAOB staff also presented a chart in a handout outlining the status of previous SAG standard-setting discussion topics, and presented the PCAOB Office of Chief Auditor (OCA) Standard-Setting Agenda. The 12 items on the standard setting agenda include topics such as a reproposal of risk assessment standards, communication with audit committees, auditing fair value measurements, and more.

Although not part of the PCAOB's formal standard-setting agenda for the upcoming year, some SAG members argued there was a need for the PCAOB to revisit the fundamental fraud standard (SAS 99) as a standalone or 'foundational' standard, in much the same way as the PCAOB is in the process of re-proposing its suite of risk assessment standards as 'foundational' standards.

Baumann and other PCAOB staff emphasized that although they do not currently have a standard-setting project on fraud on their agenda, fraud-related aspects are woven into numerous standard-setting projects, including confirmations, risk assessment, and fair value, among others (with particular emphasis in the risk assessment standards).

Damon Silvers, Associate General Counsel, AFL-CIO, and a member of the Congressional Oversight Panel appointed by Congress for the Troubled Asset Relief Program, stated, "The overall fraud standard needs to be strengthened at the same time you undertake this exercise."

In response to questions, Silvers said, "We should not expect that every audit is a forensic audit... that's absolutely not what I'm saying." However, he added, "I think we need to move the dial a little bit so auditors have some greater obligation than is currently embodied in the current fraud standard, to have an obligation to act when there is reasonable suspicion of fraud."

Read more details from the Oct. 14 PCAOB SAG meeting here: http://financialexecutives.blogspot.com/2009/10/pcaob-announces-ambitiou...