GAAS and PCAOB standards: applicability and integration.

• Author: Durak, Robert
• Position: Public Company Accounting Oversight Board - Generally Accepted Auditing Standard

Here's some guidance and resources to help practitioners apply appropriate standards in engagements for issuers and non-issuers, along with some resources to help integrate the applicable standards.

AICPA members who perform auditing and other related professional services have been required to comply with Statements on Auditing Standards (SASs) promulgated by the AICPA Auditing Standards Board (ASB).These standards constitute what is known as "generally accepted auditing standards" (GAAS). In the past, the ASB's auditing standards have applied to audits of all entities. As a result of the passage of the Sarbanes-Oxley Act of 2002 (Act), however, auditing and related professional practice standards to be used in the performance of and reporting on audits of the financial statements of public companies are now established by the Public Company Accounting Oversight Board (PCAOB). Audits of non-public companies remain governed by generally accepted auditing standards as issued by the ASB.

The term "public companies," as used above, actually encompasses more entities than just public companies. To state the authority of the PCAOB more precisely, the Act authorizes the PCAOB to establish auditing and related attestation, quality control, ethics, and independence standards to be used by registered public accounting firms in the preparation and issuance of audit reports for entities subject to the Act or the rules of the Securities and Exchange Commission (SEC).

Accordingly, public accounting firms registered with the PCAOB are required to adhere to all PCAOB standards in the audits of "issuers," as defined by the Act, and other entities when prescribed by the rules of the SEC (collectively referred to as "issuers"). Those entities not subject to the Act or the rules of the SEC (referred to as "non-issuers") must conduct the preparation and issuance of audit reports in accordance with standards promulgated by the ASB.

Standards applicable to the audits of non-issuers

In 2003, with the formation of the PCAOB, the ASB was reconstituted and its jurisdiction amended to recognize the ASB as a body with the authority to promulgate auditing, attestation, and quality control standards relating to the preparation and issuance of audit reports for non-issuers. Failure to follow ASB standards in the audit of a non-issuer would be considered a violation of Rule 201 and/or 202 of the AICPA's Code of Professional Conduct (AICPA Code).

Standards applicable to...