The Public Company Accounting Oversight Board this weekvoted to adopt Auditing Standard No. 6 – Evaluating Consistency of FinancialStatements – and an accompanying set of amendments to the board’s interimauditing standards.
The PCAOB’s adoption comes after the Financial AccountingStandard Board’s issuance of Statement of Financial Accounting Standards No.154 – Accounting Changes and Error Corrections – and the impending issuance ofStatement of Financial Accounting Standards, The Hierarchy of GenerallyAccepted Accounting Principals (GAAP).
The board also removed the hierarchy of GAAP from itsinterim auditing standards, as it believes that the hierarchy is moreappropriately located in the accounting standards.
“Auditing Standard No. 6 will improve the quality of theaudtor’s reporting on items that affect the consistency of financialstatements, such as a company’s adoption of new accounting principle or itscorrection of a material misstatement. Investors should benefit from theseimprovements.” — Mark Olson, PCAOB
The new standard and related amendments update the auditor’sresponsibilities to evaluate and report on the consistency of a company’sfinancial statements and align the auditor’s responsibilities with SFAS No.154.
Standard No. 6 also improves the auditor reportingrequirements by clarifying that the auditor’s report should indicate whether anadjustment to previously issued financial statements results from a change inaccounting principle or the correction of a misstatement. If the standard andamendments are approved by the Securities and Exchange Commission, they willbecome effective 60 days after approval.
“Auditing Standard No. 6 will improve the quality of theaudtor’s reporting on items that affect the consistency of financialstatements, such as a company’s adoption of new accounting principle or itscorrection of a material misstatement,” said Mark Olson, PCAOB chairman, in astatement. “Investors should benefit from these improvements.”