Revised standard for related parties: the PCAOB alters existing standards on auditor scrutiny in critical areas.

Author:Hodges, Cathryn
Position:Update/Practices - Public Company Accounting Oversight Board - Brief article
 
FREE EXCERPT

Aiming to put a dent in financial reporting fraud that could lead to material misstatements, the U.S. Public Company Accounting Oversight Board (PCAOB) has adopted Auditing Standard No. 18, Related Parties, and new amendments to other standards that focus on corporate related-party deals, significant unusual transactions, and financial relationships with executives. The new standard supersedes interim auditing standard, AU sec. 334, issued in 1983.

In recent inspections of related-party deals, significant transactions, and executive compensation, the board found the current approach to performing audits has not been sufficiently risk-based and has lacked adequate required procedures, revealing weaknesses in external auditors' scrutiny. "The new auditing standard and amendments we adopted today address transactions and relationships that have been contributing factors in a number of financial reporting frauds," PCAOB Chairman James Doty said in a statement. "Subjecting these areas to enhanced auditor...

To continue reading

FREE SIGN UP