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CAQ suggests changes in two PCAOB proposals

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Aug 30, 2017

On August 30, 2017, the Center for Audit Quality (CAQ), which is affiliated with the AICPA, submitted suggestions for improving the PCAOB proposals on auditing accounting estimates and auditors evaluating the work of a specialist.

The CAQ generally supported the PCAOB’s efforts in these areas, but also urged changes to the proposals.

With regard to the auditing accounting estimates proposal, the CAQ wrote that obtaining sufficient appropriate audit evidence to determine whether accounting estimates are free from bias that results in a material misstatement should not be an explicit objective of the proposed standard. In addition, the CAQ recommended that the PCAOB make it more explicit in the proposed standard that auditors should consider the results of their risk assessment procedures when determining the nature, timing, and extent of their testing procedures. The CAQ also suggested providing clarification on how the auditor could evaluate evidence from a combination of the three approaches that the auditor could employ to respond to the risks of material misstatement.

In the comment letter on evaluating the work of specialists, the CAQ:

  • Suggested that auditors be required to evaluate the “objectivity” of a specialist rather than the specialist’s “relationship to the company.”
  • Stated that the auditor may encounter matters beyond his or her expertise if required to evaluate whether data were “appropriately” used by the specialist, as suggested in the proposal.
  • Said that unintended consequences may arise if auditors are required to apply the same auditing procedures to accounting estimates regardless of whether management uses an external specialist.
  • Encouraged multiple options of acceptable forms of communication with specialists on the work to be performed, with those options stated explicitly in the proposal.
  • Expressed concern over the proposal’s plan to rescind PCAOB Audit Interpretation 11, which deals with the use of legal opinions as audit evidence.

Review the comment letters on the CAQ's website:

Review the PCAOB proposals on on the PCAOB's website:

Review an article on the Journal of Accountancy's website.

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