State Board Report


Comment letters on two PCAOB rulemaking proposals, one on auditing accounting estimates and the other on the auditor’s use of specialists, have been submitted by NASBA, and can be found on The two proposals (PCAOB Release No. 20017-002 Proposed Auditing Standard- Auditing Accounting Estimates, Including Fair Value Measurements and Proposed Amendments to PCAOB Auditing Standards and PCAOB Release No. 2017-003 Proposed Amendments to Auditing Standards for the Auditor’s Use of the Work of Specialists) were companion releases, as the PCAOB explained it “has observed that, in many cases, specialists are used to either develop or assist in evaluating various accounting estimates.” The purpose of the proposals is “to provide direction to prompt auditors to devote greater attention to addressing potential management bias in accounting estimates, while reinforcing the need for professional skepticism” and “to strengthen the requirements that apply when auditors use the work of specialists in an audit,” the Board stated.

In response to Release No. 2017-002, NASBA commented: “We commend the PCAOB on its efforts to develop a single standard on auditing accounting estimates including fair value measurements and to replace multiple existing standards. The increasing complexity of financial instruments creates new risks which need to be assessed and addressed by auditors. In addition, recent accounting standards on fair value measurements, expected credit loss and other financial reporting standards mandate new accounting and disclosure requirements which contain disclosures that need to be audited.” The letter further states: “It appears that the Proposal has been developed to address findings identified during the PCAOB’s inspection process. As State Boards, we would encourage the PCAOB to continue the development of other standards where it believes audit quality can be improved to protect the public interest, not just through areas that have been identified during the inspection process.”

Among NASBA’s comments on the use of specialists (Release No. 2017-003) were requests for application guidance on procedures to be performed by auditors to evaluate specialists used and for guidance on consideration of management’s controls related to company specialists.

Both letters can be found on NASBA’s website. The letters from Chair Ted Lodden (IA) and President Ken Bishop were developed by NASBA’s Regulatory Response Committee, chaired by W. Michael Fritz (OH).

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