PCAOB To Consider Remediation Disclosure Standard

MEETING DETAILS

The PCAOB open meeting, which will

consider proposing an auditing standard "for reporting on the elimination of material weaknesses in companies’ internal controls over financial reporting," will be held:

When

Thursday, March 31, 10 a.m.

Where

PCAOB Open Meeting Room,

K St. NW, Washington, D.C.

Listen

Click Here To Listen To A Webcast Of The Meeting

The Public Company Accounting Oversight Board is considering a new audit standard that would allow auditors to report on management assertions that previously disclosed material weaknesses had been corrected. The Board announced late Friday afternoon that it has scheduled a March 31 meeting to consider the new standard.

The Board’s Audit Standard No. 2 provides a blueprint for how auditors should report on internal controls with the year-end financials, but makes no provision for whether or how auditors can report on management’s subsequent reports when it says it has corrected a control deficiency or material weakness.

Kolins

“Every company that has a material weakness reported at the end of the year wants to correct it as soon as possible,” said Wayne Kolins, national director of assurance for BDO Seidman and a member of the PCAOB’s Standing Advisory Group. “Companies can say what they want about the correction, but the problem is what standard can auditors follow to report on management’s report?”

Christi Harlan, a spokeswoman for the PCAOB, said the Board discussed the issue in November with the SAG. “We’re hearing from companies and auditors that they’d like some guidance on how auditors can respond” if asked to report on a management claim of correction, Harlan said. She stressed the board will assure auditors will be given an option to assess management claims regarding correction, but will not be required to do so.

Kolins said the board’s action is not unexpected. “Some of the material weaknesses we’re seeing are extremely narrow,” Kolins said. “But you can’t do a piecemeal assessment under SEC reporting rules.”

AICPA Committee Proposes Standards for Accounting and Review Services

The Accounting and Review Services Committee of the American Institute of Certified Public Accountants is seeking comments on three proposed statements on standards for accounting and review services.

The Omnibus Statement on Standards for Accounting and Review Services seeks to amend existing standards to compel reporting on possible fraud evidence, to guide successor accountants following a staffing change on how to compile or review a restatement adjustment, and to provide guidance on obtaining updated representation letters.

The proposed statement Restricting the Use of an Accountant’s Compilation or Review Report gives guidance to accountants on when its reports should be restricted and what language accountants should use in restricted reports.

The third proposal, Compilation of Specified Elements, Accounts, or Items of a Financial Statement and Pro Forma Financial Information, is intended to allow an accountant to report on specific aspects of a financial statement without reporting on the entire statement. The executive summary of the compilation standard specifically asks commenters to address whether the statement should require some kind of communication to assure third parties understand that the accountant’s report addresses only specific aspects of financials, not all financials.

We’ve made available copies of each of the exposure drafts in the box at right. Comments on all three proposed statements are due June 10, 2005.

IFAC Proposes Standards On Group Audits, Communication, Reporting

The International Auditing and Assurance Standards Board of the International Federation of Accountants has issued four new proposed standards intended to enhance the quality of group financial statement audits, independent auditors’ reports, and the communications between auditors and those charged with governance.

John Kellas, chairman of the IAASB, said in a statement that the proposals respond to public expectations for tougher audit standards and take into consideration regulator and standard-setting developments around the world. “They proposed standards will enhance current practice and promote consistency worldwide,” he said.

The proposed international standards are at right.