Auditing Slandered Adopted by PCAOB - Assignment
Added on 2020-03-16
4 Pages1256 Words38 Views
The PCAOB has adopted an auditing standards that makes it compulsory for the auditors tomention areas of high audit risk in the audit report. It needs the auditors to disclose in theiraudit report such data and facts with regards the details they have communicated or are tocommunicate to the audit committee that connotes to the important accounts or disclosuresand included specifically demanding, prejudiced or intricate audit judgment, known ascritical audit matters (CAM). Some of the matter that they are to cover in the audit report arethe risks of substance misstatements inclusive of critical risks, the extent of the opinion of theauditor with regards such stances which relate to the financial statements that calls forapplication of prominent opinion, the character and timing of important abnormal dealingsand the degree of audit endeavor and opinion associated to these dealings, the extent of theprejudice while application of the audit procedure to take care of the matter or in examiningthe outcome of the processes and the kind of audit support and proofs being collected.Therefore due to the said change, even though revenue recognition is considered to be a fraudrisk and such risks are considered to be very crucial under the PCAOB standards, yet anyconcern with regards the revenue recognition that does not include challenging, subjective orcomplicated auditors opinion, it is not to be defined as CAM under the standard (Weingarten,2016). However there exists a host of similarities as well as differences between the CAM stated byPCAOB standard and the key audit matters stated by ISAAB. The approach adopted by bothof them is somewhat same which has led to the increase of the quality of the audit reportthereby ensuring better transparency to the shareholders and also ensuring that the interactionis not one sided during the course of the audit. As per ISAAB, the auditors of the listedentities are compulsorily required to converse KAM to various entities such as the publicentities or entities which are a part of a specific industry etc. Whereas the PCAOB confirmedcommunication of CAM for audits which are performed under the PCAOB standards. KAM
is chosen basis the matters which are charged to governance but CAM are to becommunicated which conforms to the accounts or disclosures which are crucial to thefinancial statements and concludes specific challenging, subjective or complicated auditopinion. Thus although the two terms are similar yet the only difference lies in the fact thatCAM is related to the accounts or disclosures that are significant to the financials (IAASB2017). On analyzing the various changes proposed in the PCAOB standards, it is understood that thesaid standard will be of great use. The said changes are being introduced as the disclosure ofthese data in the audited financial statements will help negate the chances that auditors maydisclose original data. Further the new standard also wants the auditors to disclose as to sincewhen are they associated with the client as an auditor, this way it would make the investorsaware of the length of the association with the client and whether the same would impactupon the opinion stated. Next, the standard also wants them to revise the language of thereport and add a line “whether due to fraud or error” to the narration of the responsibility ofan auditor as this would entail to achieve assurance that the financial statements are notmisstated and are true in all respects (ey.com., 2017). Last but not the least, the changes proposed in the PCAOB standard also ensures a two wayinteraction i.e. between the audit committee and the management with regards the CAMbefore the final report is being published. This ensures better conversation of the issues alongwith resolution and also transparency as well. The new auditing reporting requirement on audit practice will very much help to improvisethe communication of the CAM to the investors (Odoner, & King, 2017). The report given bythe auditor in most of the cases lack the containment of audit specific data. The auditor seemsto know much more about the company and its financial position. The present form of the
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