PCAOB Proposes New Framework for Reorganization of PCAOB Auditing Standards
Deloitte's Heads Up discusses the PCAOB's recently issued release that includes a proposed framework for the reorganization of PCAOB auditing standards. Under the proposed framework, PCAOB Auditing Standards 1-16 and PCAOB interim standards would be reorganized into a topical structure (based on the audit process) by using a four-digit sequential numbering scheme. Comments on the release are due by May 28, 2013.
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December 17, 2012: SEC Passes AS 16
AS 16 States That The Objectives of the Auditor are to:
- Communicate to the audit committee the responsibilities of the auditor in relation to the audit and establish an understanding of the terms of the audit engagement with the audit committee;
- Obtain information from the audit committee relevant to the audit;
- Communicate to the audit committee an overview of the overall audit strategy and timing of the audit; and
- Provide the audit committee with the timely observations arising from the audit that are significant to the financial reporting process.
Key Responsibilities of the Audit Committee Include:
- Having an effective relationship with management, the internal auditors, and the independent auditor
- Taking a "risk-intelligent" governance approach
- Overseeing the establishment of appropriate controls and antifraud programs
- Overseeing dissemination of earnings press releases, financial information, and earnings guidance
- Monitoring a robust code of ethics
- Establishing a process for investigating allegations, especially those against senior management.
Audit Committee Composition Considerations
- Focus on committee composition, including independence, financial expertise, broad business or leadership perspective, industry knowledge, and succession planning.
- Consider rotating audit committee members periodically.
- Engage independent advisers to help evaluate the audit committee’s performance when necessary.