State Board Report
As envisioned by the Sarbanes-Oxley Act, the Public Company Accounting Oversight Board (PCAOB) and the State Boards of Accountancy “create a regime of professionalism,” PCAOB Chair James R. Doty told the NASBA Annual Meeting on November 3. He thanked NASBA Past Chair Gaylen Hansen for his six years of service on the PCAOB’s standing advisory group and NASBA legal counsel Noel Allen for putting forward winning arguments when the PCAOB’s constitutionality was threatened. Registration with the PCAOB does not supersede a firm’s registration with the State Boards, Mr. Doty noted, and collaboration with the State Boards is needed. Investors have to trust in the information they receive to keep money flowing in the marketplace. A lack of investor confidence has turned investors to other uses of their capital and corporate management does not view audits as a strategic tool, he observed.
“We have got to increase the quality of the audit and that is the common endeavor we are involved in,” Mr. Doty said. To do this: (1) The PCAOB has established a Center for Audit Analysis, which is bringing high quality economic analysis to the PCAOB. (2) The PCAOB is also giving audit committee members new tools to promote more robust discussions with auditors. (3) The PCAOB is staying active in the standard-setting process, having established 18 standards in 10 years.
The PCAOB continues to work on increasing transparency, including reporting of the engagement partner’s name. This has already been enacted in Sweden, the United Kingdom and Taiwan. Mr. Doty said the PCAOB appreciated NASBA’s comment letter in support of this proposal. He hoped that a decision on this requirement would be made soon.
The PCAOB has also proposed an auditor’s reporting model that would provide a framework in which critical audit matters would be presented. This proposal has also been commented on by NASBA. Just as the IAASB approved a new standard audit report, the PCAOB will continue to study reforms to the audit report. Mr. Doty said he expects to conduct more outreach on this topic in the following months.
Papers on using the work of specialists and going concern should be expected from the PCAOB soon, Chair Doty told the NASBA audience.
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