Audit regulators are preparing to issue new proposed rules on auditing accounting estimates and using the work of specialists.

The staff at the Public Company Accounting Oversight Board is preparing revised proposals for the board to consider in the fourth quarter of this year, according to a quarterly update to the board’s standard-setting agenda. The agenda indicates staff members have analyzed comments to earlier proposals issued in mid-2017 and are developing new recommendations for the newly seated PCAOB to consider.

The PCAOB first introduced a new standard on auditing accounting estimates, including fair value, and a separate new standard on the auditor’s use of the work of specialists in June 2017. The standard on auditing estimates was meant to replace existing guidance to give auditors more direction in what has become a complex and problematic area of auditing. The standard as first proposed emphasized auditors are expected to exercise professional skepticism and pay greater attention to the potential for management bias in the establishment of estimates.

PCAOB inspections routinely call out problems with auditing of estimates, with reports commonly noting numerous ways in which auditors have failed to adequately question management estimates and assumptions. Estimates have become more prevalent in financial reporting over the past several years as an increasing number of accounting standards require the use of judgments and estimates, the most recent and prominent example being the massive transition companies have just completed in adopting a new standard on revenue recognition.

The separate standard on the auditor’s reliance on the work of specialists was intended to strengthen the requirements on auditors when they engage various types of outside specialists to provide information that becomes important to audit conclusions. Whether auditors might be relying on the expertise of engineers or environmental specialists, or accountants who specialize in valuations, the standard gives auditors direction to devote more attention to information provided by those types of specialists in order to regard it as reliable audit evidence.

The PCAOB accepted comments on the proposals through August 2017. The board faced some uncertainty heading into the latter part of 2017, with new appointments to the board anticipated from the Securities and Exchange Commission. Ultimately, the SEC replaced the entire five-member board, with new members taking over in the first several weeks of 2018.

The board’s first standard-setting agenda indicated it began some research to explore whether it should issue new guidance or consider new standard-setting around auditor independence. The board has since indicated it is taking a broad look at the entire audit regulatory process to determine if changes are warranted, including to its controversial audit inspection program.