The Public Company Accounting Oversight Board (PCAOB) adopted Auditing Standard No. 7, Engagement Quality Review (EQR) last week. “The EQR standard provides a framework for the engagement quality reviewer to evaluate objectively the significant judgments made and related conclusions reached by the engagement team in forming an overall conclusion about the engagement,” says a PCAOB release.
 
“At the same time, the EQR is not intended to become a second audit,” observed Chair Mark Olson, in a statement to the Board last week.  “[Its] approach appropriately focuses the review procedures on the areas of a particular audit that are more likely to have significant engagement deficiencies. The reviewer is required to evaluate the significant judgments made and related conclusions reached by the engagement team and to evaluate the engagement team’s assessment of and responses to significant risk, including fraud risk.”  The standard also takes into account smaller firms with limited resources.  “In particular, the standard allows firms the flexibility to use a qualified reviewer from outside the firm.”  Once the SEC approves, the standard will be effective for both the EQR of audits and interim reviews for fiscal years beginning on or after December 15, 2009.

Another release and invitation to apply.  Also last week, the PCAOB issued its Concept Release on Requiring the Engagement Auditor to Sign the Audit Report, and its invitation to apply to an Investor Advisory Group. The Group will “represent a broad spectrum of the investment community and consist of individuals who have a demonstrated history of commitment to investor protection.” Any person or firm may submit nominations to InvestorAdvisoryGroup@pcaobus.org, including the nominee’s name, a short biography, and contact information. The deadline is August 17, 2009, with appointments announced by September 17th and terms beginning in October.