Issue Information

• Published date: 01 July 2017
• DOI: http://doi.org/10.1002/jcaf.22228
• Date: 01 July 2017

VOLUME 28, NUMBER 5 • July/August 2017

The Journal of

Letter From the Editor

James B. Edwards

Features

Updates and Comparisons Regarding Changes to the Audit Reporting Model in the

United States, United Kingdom, and European Union

Bradley P. Lawson, Vivian O’Hara, and Angela Wheeler Spencer

In May 2016, the PCAOB proposed some of the most significant changes to the audit report

since the report was adopted in the 1940s. Among other things, the changes would require

auditors to disclose within the audit report CAMs, which are matters that are communicated

to the audit committee and that involved especially challenging, subjective, or complex audi-

tor judgement. Although the PCAOB’s latest proposal is not final, the changes are similar to

standards already adopted by the IAASB. Additionally, PCAOB Chairman James R. Doty indi-

cated that he thought the latest proposal was “the right approach” and that final rules should

be adopted “soon”. This article provides a timeline of the PCAOB’s proposed changes, as

well as the changes implemented by the UK and IAASB, discusses changes contained within

the PCAOB’s latest proposal, and compares those changes to the IAASB’s standards. We also

discuss recent research regarding this topic. Last, we summarize comments on the PCOAB’s

latest proposal and outline steps that management and auditors need to take to prepare

themselves for when the final standards take effect.

AS 18: New Guidance for Auditing Related Party Transactions

Paul M. Clikeman and Austin Liu

Undisclosed related-party transactions played a significant role in high-profile accounting

scandals such as Enron, Tyco, and Adelphia. Public Company Accounting Oversight Board

(PCAOB) inspectors have discovered many shortcomings in audit procedures applied to

related party transactions, and the Securities and Exchange Commission (SEC) has sanc-

tioned numerous CPA firms for failing to identify or disclose clients’ transactions with affili-

ated entities. This article identifies the risks associated with related party transactions and

describes audit procedures to provide reasonable assurance that all such transactions are

properly identified, accounted for, and disclosed in the financial statements.

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