New Heads Up on PCOAB Standing Advisory Group meeting

25 Oct 2010

Deloitte (United States) has released a Heads Up summarising the meeting of the PCAOB's Standing Advisory Group (SAG) held on 13-14 October 2010.

The meeting discussed the following: designing and implementing a firm system of quality control, FASB projects and their potential impact on auditors, and potential PCAOB rulemaking regarding the failure to supervise. In addition, the PCAOB provided an update on recent PCAOB developments and on its standard-setting activities.

The following extract from the newsletter discusses the impact of more principles-based accounting as the FASB and IASB work together on joint projects and the United States considers IFRS adoption:

There was considerable debate and discussion regarding the increase in judgment that will be expected of both issuers and auditors as a result of the more principles-based approach the FASB is taking in the accounting standards. The discussion included the following observations:

Increased judgment results in a need for increased documentation to support those judgments. Some suggested that the SEC should explicitly require such documentation by issuers.
Some suggested that issuers need a judgment framework to help them make accounting decisions. Others believed that a similar judgment framework should also be developed for auditors, although there was some disagreement on this point.
Some cautioned that, rather than be indirectly contained in PCAOB standards, guidance for issuers should be developed and released by the SEC.
Board member Charlie Niemeier raised concerns about what appears to be a trend of relying on increased disclosures to offset measurement uncertainty, even though disclosures are subjective and difficult to audit.
One member wanted to emphasize the importance of professional skepticism on the part of auditors.

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