PCAOB May Revise Standards Surrounding Auditors’ Use of Specialistsby
The Public Company Accounting Oversight Board (PCAOB) is seeking public input on whether its standards adequately address the auditor’s use of the work of specialists.
On May 28, the US audit regulator issued a staff consultation paper, The Auditor’s Use of the Work of Specialists, that describes information about a potential need for changes to PCAOB standards and discusses possible alternatives.
The PCAOB is soliciting views from investors, accounting firms, specialists, public companies, and other stakeholders about the role of specialists in financial statement audits. The deadline for comments is July 31.
The use of the work of specialists will also be among the topics discussed during the next PCAOB Standing Advisory Group (SAG) meeting on June 18. SAG members will be asked to provide their views on questions raised in the staff consultation paper.
Among the questions are whether PCAOB standards sufficiently address auditors’ use of specialists’ work and whether more rigorous standards and specific procedures are needed to help auditors respond to the risks of material misstatement in financial statements.
The importance of specialists – such as valuation specialists, appraisers, engineers, and actuaries – has increased in recent years, in part, because of the increasing complexity of business transactions and the resulting complexity of information needed to account for those transactions.
A sample of audits by large, global accounting firms that PCAOB staff selected for inspection in 2014 found that auditors used the work of at least one specialist in about 90 percent of those audits, with an average of five individual specialists performing some work on each audit. Specialists also performed work in an average of two fields of expertise on each audit.
“The use of the work of specialists is important to investors because it can help an auditor detect material misstatements in complex areas of a company’s financial statements,” PCAOB Chairman James Doty said in a written statement. “We want our standards to keep pace with realities in the marketplace.”
PCAOB staff also is requesting information about current practices and the economic impact of potential changes to standards, including data, to inform the PCAOB's economic analysis associated with this project.
“This consultation paper is a key part of our outreach and seeks comments from all stakeholders,” said Martin Baumann, PCAOB chief auditor and director of professional standards. “The comments will inform the staff's potential recommendation that the board propose changes to auditing standards governing the auditor's use of the work of specialists for the benefit of the investing public.”