Audit regulators will assemble their advisory panel to address a range of emerging auditing issues, but the agenda is perhaps most remarkable for what it doesn't address – mandatory audit firm rotation.
The Public Company Accounting Oversight Board's recent concept release on auditor objectivity and independence caused quite a stir when it suggested perhaps a system of mandatory audit firm rotation would inspire auditors to get more skeptical when challenging management assertions in financial statements. It's easily the biggest concern among auditors and their public company clients, yet it doesn't appear on the PCAOB's agenda for its upcoming meeting with its Standing Advisory Group. Perhaps the board has had its fill of feedback after reading more than 600 comment letters and hearing from nearly 50 speakers at a recent two-day roundtable on the controversial topic, not to mention a clear signal from the House Financial Services Committee to lay off the subject.
Instead, the PCAOB wants to chat with its advisers about its proposed auditing standard, Related Parties, meant to improve the auditor's evaluation of a company's accounting for relationships with insiders or related parties that might affect financial statements, as well as significant unusual transactions that are described in financial statements. The board also wants to question advisers on whether to establish new guidance for when and how auditors should raise a red flag that a company's ability to continue as a going concern may be in doubt – specifically whether the board should more clearly establish thresholds and timelines for auditors to consider in deciding whether to raise that flag.
Finally, the board wants to hear wider views from its advisory group on where to focus its future standard setting agenda. Should it form a fraud task force to explore ways to help auditors detect fraud? Should the board consider new standards to improve the auditing of revenue recognition, especially as the Financial Accounting Standards Board prepares a new accounting standard? Should the board beef up its standards for how auditors rely on management assertions, internal audit work, third-party service organization audit reports, or other outside work that flows into the financial statements? The discussions also will address audit sampling, audit procedures, offshoring of audit work, and communications during a transition to a new audit firm.