Clarifying CBA, PCAOB differences.

• Author: Ueltzen, Michael G.
• Position: Audit Documentation - California Board of Accountancy - Public Company Accounting Oversight Board

The following guidance clarifies some apparent conflicts noted by Bertha Minnihan of Mohler, Nixon & Williams in Campbell between the California Board of Accountancy's audit documentation rules--outlined in the October 2004 issue of California CPA--and the Public Company Accounting Oversight Board's Audit Standard No. 3.

Minnihan's questions, and our responses, are below and should aid California practitioners who audit publicly traded companies.

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Can you clarify the key dates related to the audit documentation requirements?

There are two key dates under both the CBA rules and PCAOB standards: the report issuance date, or report release date, and the documentation completion date.

The report issuance date is not clearly defined in the CBA rules (Rule Sec. 68.4), but can be interpreted to mean the date the final report leaves the practitioner's office. PCAOB Audit Standard No. 3 (AS-3) uses the term "report release date" and defines it as "... the date the auditor grants permission to use the auditor's report in connection with the issuance of the company's financial statements ...." (AS-3, Paragraph 14).

As for the documentation completion date, the auditor has 60 days after the report issuance date to complete the audit documentation under CBA Rule 68.4. The PCAOB allows 45 days from the report release date to complete audit documentation. (AS-3, Paragraph 15).

Audit documentation is not allowed to be deleted after the report issuance date under CBA rules, but the PCAOB appears to allow deletions prior to the documentation completion date. Am I reading this correctly?

Yes, the rules have some significant differences.

Rule Sec. 68.4(c) states that prior to the audit completion date "... documents may be added to the file for the assemblage and documentation of work previously performed." Because the rules only allow documents to be added, documents, by inference, may not be deleted.

The PCAOB, though, appears to allow deletions between the report completion date and the documentation completion date.

The PCAOB states that "[c]ircumstances may require additions to audit documentation after the report release date. Audit documentation must not be deleted or discarded after the documentation completion date, however, information may be added." (AS-3, Paragraph 16). Therefore, documents may not be deleted after the documentation completion date, but the inference is that documents may be deleted up to that date.

Can...