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PCAOB adopts auditing requirements on related parties, significant unusual transactions, and financial relationships with executives

  • PCAOB (US Public Company Accounting Oversight Board) Image

Jun 11, 2014

The PCAOB has adopted an auditing standard and amendments that establish requirements for an auditor’s evaluation of a company’s identification of related parties and its relationships and transactions with those parties.

The new standard, Auditing Standard No. 18, Related Parties, and amendments are intended to accomplish the following:

  • Relationships and transactions with related parties — Enhance auditor performance requirements for “identifying, assessing, and responding to the risks of material misstatement associated with a company's relationships and transactions with its related parties.”
  • Significant unusual transactions — Strengthen existing PCAOB requirements related to the auditor’s identification and evaluation of these transactions.
  • Financial relationships and transactions with executive officers — Increase awareness of “incentives or pressures for the company to achieve a particular financial position or operating result.”

Pending approval by the SEC, the standard and amendments are effective for audits of financial statements and reviews of interim financial information for fiscal years beginning on or after December 15, 2014.

For more information, see the press release, final rule, and fact sheet, as well as speeches by the following individuals, on the PCAOB’s Web site:

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