PCAOB Adopts New Auditing Standard

The Public Company Accounting Oversight Board this week voted to adopt Auditing Standard No. 6 – Evaluating Consistency of Financial Statements – and an accompanying set of amendments to the board’s interim auditing standards.

 

The PCAOB’s adoption comes after the Financial Accounting Standard Board’s issuance of Statement of Financial Accounting Standards No. 154 – Accounting Changes and Error Corrections – and the impending issuance of Statement of Financial Accounting Standards, The Hierarchy of Generally Accepted Accounting Principals (GAAP).

 

The board also removed the hierarchy of GAAP from its interim auditing standards, as it believes that the hierarchy is more appropriately located in the accounting standards.

 

“Auditing Standard No. 6 will improve the quality of the audtor’s reporting on items that affect the consistency of financial statements, such as a company’s adoption of new accounting principle or its correction of a material misstatement. Investors should benefit from these improvements.” -- Mark Olson, PCAOB

 

The new standard and related amendments update the auditor’s responsibilities to evaluate and report on the consistency of a company’s financial statements and align the auditor’s responsibilities with SFAS No. 154.

 

Standard No. 6 also improves the auditor reporting requirements by clarifying that the auditor’s report should indicate whether an adjustment to previously issued financial statements results from a change in accounting principle or the correction of a misstatement. If the standard and amendments are approved by the Securities and Exchange Commission, they will become effective 60 days after approval.

 

 

“Auditing Standard No. 6 will improve the quality of the audtor’s reporting on items that affect the consistency of financial statements, such as a company’s adoption of new accounting principle or its correction of a material misstatement,” said Mark Olson, PCAOB chairman, in a statement. “Investors should benefit from these improvements.”