Issue Information

Published date01 July 2017
Date01 July 2017
VOLUME 28, NUMBER 5 • July/August 2017
The Journal of
Letter From the Editor
James B. Edwards
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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