The Public Company Accounting Oversight Board (PCAOB) has issued for public comment two standard-setting proposals: one on auditing accounting estimates including fair value measurements and the other on the auditor’s use of the work of specialists. Of course, specialists include valuation experts. Comments on both proposals are due Aug. 30, 2017.
One of the matters the new rules seek to reinforce is that of “professional skepticism.” That is, you should not simply corroborate the information you get from management or other third parties. You need to look at any negative evidence and address it. Earlier this year, the PCAOB found that professional skepticism was lacking when a former PwC auditor failed to adequately scrutinize accounts receivable, which may have led to an overvaluation of this asset. The auditor was censured, fined, and barred for two years.
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