State Board Report

October 2008

Tension is obvious between forces moving toward globalization of standards and the other forces developing, maintaining and enforcing US standards, Public Company Accounting Oversight Board Founding Member Bill Gradison observed in an address on September 16 at North Carolina State University. He pointed out that the current “state of play” involves two sets of accounting standards GAAPand IFRS (with numerous local variations) and three sets of auditing standards which are each in a state of flux: “the ISAs toward which many non?US jurisdictions seem to be moving, the ASB standards which apply to non?issuers in the United States (and are conceptually ‘ISAs plus’), and the PCAOB standards for issuers.”

“My personal view,” Mr. Gradison said, “is that in the long run adoption of a single high?quality auditing standard ought to be the primary goal. That, however, is not an endorsement of the ISAs. In fact, PCAOB is in the process of replacing its interim standards and the new PCAOB standards will go beyond the ISA’s. As a practical matter, the chances of full convergence of these two standards are somewhere between zero and nil since there has not – to put it mildly – been a rush of non?US standards writers to adopt anything close to PCAOB’s internal control over financial reporting standard – AS5 which is required by Section 404 of Sarbanes?Oxley. At precisely the same time as PCAOB is revising its interim standards, according to John Kellas, Chairman of the International Auditing and Assurance Standards Board, International Standards of Auditing ‘are used or being adopted by more than 100 countries’ and are being applied by the larger firms to their international audit work.”

Mr. Gradison pointed out that part of the PCAOB’s Strategic Plan for 2008 committed the Board to playing “a leadership role in international efforts to improve auditor oversight and auditing practices worldwide and reduce duplication of effort” by examining “the implications for the PCAOB’s mission of multiple auditing standards and varying audit environments across global capital markets and consider how the Board should respond.”

Related News

Full Issue