Yesterday the Public Company Accounting Oversight Board (PCAOB) voted to adopt Auditing Standard No. 6, Evaluating Consistency of Financial Statements, and an accompanying set of amendments to the Board's interim auditing standards. The Board adopted these measures in light of SFAS 154, Accounting Changes and Error Corrections, and the impending SFAS on the Hierarchy of Generally Accepted Accounting Principles. “The new standard and related amendments update the auditor's responsibilities to evaluate and report on the consistency of a company's financial statements and align the auditor's responsibilities with SFAS No. 154,” says the PCAOB release. The new standard also clarifies that the audit report should indicate whether an adjustment to a prior financial statement “results from a change in accounting principle or the correction of a misstatement.”
Another change: The Board also relocated the hierarchy of GAAP from its interim auditing standards to the accounting standards, to align with the FASB’s intent to incorporate the same. The FASB also plans to coincide the effective date of its GAAP hierarchy standard with that of the PCAOB. Auditing Standard No. 6 and the amendments will become effective sixty days after approval by the Securities and Exchange Commission. More information is available at www.pcaobus.org.
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