• Completing proposed auditing standards:
• Risk Assessment (seven new standards, see our news story of 22 October 2008).
• Engagement Quality Review
• Projects on new or revised standards on:
• Fair value measurements and specialists (very high priority, concept release before the end of 2008)
• Confirmations
• Related parties
• Guidance for auditors of smaller companies relating to AS No. 5 (internal control audits)
• Action plan for review of interim standards (AICPA standards that PCAOB adopted when it was formed)

All companies in the sample gave disclosures about their approach to impairment testing of goodwill. However, the level of supporting detail varied greatly:

• For many companies, the disclosures were more generic than specific in nature. Only a minority of companies provided information that was directly relevant to their business. The report describes over half of the company reports as 'boiler plate – rather uninformative'.
• Narrative information about the way in which key assumptions are identified and quantified tended to be vague. In many cases there was a generalised statement to the effect that past experience was modified based on management's expectations for the future.
• Only a minority of the companies surveyed provided information by cash generating unit ('CGU'), even where significant amounts of goodwill were allocated to more than one CGU.

EU preparers, auditors and other stakeholders should take note of the IASB staff position on this SEC-FASB clarification on fair value accounting issued on 2 October 2008 which was also confirmed by the IASB in its press release on 14 October 2008. It should be highlighted that the IASB staff has reviewed that clarification and considers it consistent with IAS 39. In particular, the three committees take note and support that the clarification addresses among other issues the following topics:

• Management's internal assumptions. The use of management estimates that incorporate current market participant expectations of future cash flows, and include appropriate risk premiums is acceptable, when an active market for a security does not exist.
• Use of market quotes (eg, broker quotes or information from a pricing service) when assessing the mix of information available to measure fair value. Broker quotes may be an input when measuring fair value, but are not necessarily determinative if an active market does not exist for the security.
• The results of disorderly transactions are not determinative when measuring fair value. Distressed or forced liquidation sales are not orderly transactions. Determining whether a particular transaction is forced or disorderly requires judgement.
• Transactions in an inactive market can affect fair value measurements, they may be inputs when measuring fair value, but would likely not be determinative. The determination of whether a market is active or not requires judgement.

The proposed risk assessment standards are as follows:

• Audit Risk in an Audit of Financial Statements. This proposed standard describes the components of audit risk and the auditor's responsibilities for reducing audit risk to an appropriately low level in order to obtain reasonable assurance in an audit of financial statements.
• Audit Planning and Supervision. This proposed standard describes the auditor's responsibilities for planning the audit, including assessing matters that are important to the audit, and establishing an appropriate audit strategy and audit plan. The proposed standard also describes the responsibilities of the engagement partner and other engagement team members for supervising and reviewing the work of the engagement team.
• Identifying and Assessing Risks of Material Misstatement. This proposed standard describes the auditor's responsibilities for identifying and assessing risks of material misstatement. The risk assessment process discussed in the proposed standard includes information-gathering procedures to identify risks (e.g., obtaining an understanding of the company, its environment, and its internal control) and analysis of the identified risks.
• The Auditor's Responses to the Risks of Material Misstatement. This proposed standard sets forth the auditor's responsibilities for responding to the risks of material misstatement in the general conduct of the audit and specific audit procedures.
• Evaluating Audit Results. This proposed standard describes the auditor's responsibilities regarding the process of evaluating the results of the audit in order to form the opinion(s) to be presented in the auditor's report. This process includes evaluating uncorrected misstatements and control deficiencies identified during the audit.
• Consideration of Materiality in Planning and Performing an Audit. This proposed standard sets forth the auditor's responsibilities for applying the concept of materiality, as described by the federal securities laws, in planning the audit and determining the scope of the audit procedures.
• Audit Evidence. This proposed standard sets forth the auditor's responsibilities regarding designing and applying audit procedures to obtain sufficient appropriate evidence to support the opinion(s) in the auditor's report. In particular, it discusses the principles for determining the sufficiency and appropriateness of audit evidence.