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State Board Report

November 2016

NASBA plays an important role in facilitating the relationship between the State Boards and the federal regulator, Public Company Accounting Oversight Board Chairman James Doty reminded the NASBA audience. Meetings of NASBA and AICPA leaders have helped to further the sharing of database information between the organizations. Thirty-four State Boards now routinely receive the PCAOB’s reports and NASBA staff has distributed PCAOB staff alerts to the Boards.

The PCAOB has “found numerous high quality audits,” Chairman Doty reported and he commented, “These auditors are the unsung heroes.” But he added the PCAOB inspectors “also found numerous audit deficiencies. “ State Board members recognize the “high cost of financial reporting problems,” and that such cost is often greater than the upfront costs, Chairman Doty observed.

Just as the NASBA/AICPA International Qualifications Board has been working to establish mutual recognition agreements that would not require re-credentialing, so the PCAOB has been working to extend its inspections to its registered firms in other countries.

Chairman Doty pointed out the current pass/fail audit report issued by an anonymous audit partner has not changed for 75 years, and he maintains the report can be more useful. Beginning in the first quarter of 2017, the name of the engagement partner and other CPA firms the audit firm worked with will have to be filed on form AP. Chairman Doty believes the State Boards will leverage this information. Investors want to know basic decisions made by the auditors, which is why the PCAOB has proposed a framework for critical audit matters.

He praised NASBA Chair Donald Burkett’s October 28 speech to the AICPA Council in which he said, “As CPAs we have fiduciary responsibility beyond serving our clients.” Chairman Doty observed auditors “are the eyes and ears of investors.” He concluded: “Faith in the auditor will determine the cost of capital.”

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