Auditing Assignment | New Reporting Standards

Added on - 01 Apr 2020

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Running Head: PCAOB’s introduction of New Reporting StandardsNEW STANDARDSON AUDITREPORTING
PCAOB’s introduction of New Reporting Standards1Key changes in the reporting requirements of the auditreportPublic Company Accounting Oversight Board is the regulatory body which is in existence toregularise the auditors of public companies. PCAOB adopts the new auditing standards ontime to time basis as per the requirements of the changing market environment. It hasannounced the new auditing standards recently in order to widen the scope of audit reportingdone by the auditors as a part of their audit engagement. The new standard aims at enhancingthe quality of audit reports and making the reports more informative so as to raise theauthenticity of the audit report in the eyes of intended users. Along with the previousreporting requirements PCAOB has directed the auditors of public companies to provide theadditional information relating to the critical audit matters of the entity. Critical audit mattersare those matters in which auditor has to apply subjective professional judgements during theaudit engagement and requires communication of such matters to the audit committee(Christensen, Glover & Wolfe, 2014).Also, the auditors conducting the audit under thestandards prescribed by the PCAOB are required to disclose in the audit report, their audittenure i.e. the date from which they have started giving professional services to the companyon a consistent basis. PCAOB has introduced a new format to report and the changed formatdemands the auditors to state the fact that auditors are independent parties and hence theiropinion is not influenced by any external factors (Ning Chiu, 2017). Auditors are alsorequired to incorporate a new phrase in the audit report starting with the words as ‘’whetherdue to frauds and errors’’ while describing their responsibilities in relation to provision ofreasonable assurance about the true and fair view of financial statements. While reporting thecritical audit matters auditors are also subjected to describe the considerations that enabled
PCAOB’s introduction of New Reporting Standards2them to identify the matters as critical and the manner in which such critical matters are dealtwith.Similarity and Differences between the IAASB &PCAOB’’s audit reporting approachesThe International Auditing and Assurance Standards Board (IAASB) & Public companyaccounting oversight board (PCAOB) pursues almost similar approaches to enhance thereporting requirement for the auditors as both the regulatory bodies are aimed to promotegreater level of transparency in the financial reports of the company. The auditors arerequired to report on the key audit matters and the critical audit matters of only currentfinancial year as per both the boards. Key audit matters are defined by IAASB as the mattersholding high significance in the overall audit and are necessary to be reported to the investorsto draw their attention. These matters requires communication with those charged withgovernance about the key concern. Whereas the critical audit matters are defined by thePCAOB. Even after the having the similar objectives in relation to auditing practices, theapproaches followed by both the boards varies in terms of documentation requirements andother areas (IAASB, 2017). IAASB requires the auditors to document the matters which hadseek auditors attention and the logical reasons for the determination as to whether a particularmatter arising of audit is key audit matter or not. However, PCAOB sets out the requirementof identifying and reporting all the matters that were communicated to the company’s auditcommittee no matter whether they were determined as critical audit matters or not. Further,PCAOB restricts the auditors to communicate to the critical audit matters in the cases whereadverse opinion is being expressed (PCAOB, 2017). On the other hand, IAASB permits theauditors to communicate the key audit matters even when the auditor expresses adverseopinion. But in case where disclaimer of opinion is being provided by the auditors both
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