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Reorganization of Audit Standards Approved

The PCAOB unanimously approved a reorganized format for its audit standards into a topical structure with a uniform numbering system. The effort is expected to make the standards easier to navigate and use.

The PCAOB on March 31, 2015, unanimously approved a reorganization of its standards to make them more readable and easier to use.

The board adopted amendments that largely reflect Release No. 2013-002 , Proposed Framework for Reorganization of PCAOB Auditing Standards , from 2013.

“The standards will be organized by topics that generally follow the flow of the audit process, making their use easier and more efficient for auditors,” said PCAOB Chairman James Doty.

The revised format replaces the sequentially numbered standards with a topical structure using a four-digit numbering system. The topics include general standards that cover broad auditing principles and activities, procedures, reporting, SEC filing requirements, and non-audit work that’s part of a financial statement audit.

The revised format will integrate the PCAOB’s standards and the interim standards the board inherited from the AICPA.

In May 2014, the board issued Release No. 2014-001 , Supplemental Request for Comment: Proposed Framework for Reorganization of PCAOB Auditing Standards and Related Amendments to PCAOB Auditing Standards and Rules , to ask for extra comments. The request detailed the original proposal, line by line, to the audit regulatory board’s standards.

The board at the time also released on its website a demonstration version of the proposed framework that showed how its standards would look in the new format.

The reorganized standards do not impose new requirements on auditors, the PCAOB said.

Accounting firms writing to the PCAOB said they generally supported the effort and said they believed it would increase the standards’ usability.

“Moving forward, new auditing standards adopted by the board will be issued as new or replacement sections and paragraphs within the new structure,” said PCAOB Chief Auditor Martin Baumann.

Baumann hoped that the ease of navigability will also promote compliance with auditing standards.

“I think the set of standards that’s organized following the flow of the audit from initial stages of the audit to auditor completion of audit…, it’s just a logical way to look at the audit,” Baumann said. “There will be some one-time costs for firms to update their methodologies with references to the new standards, some learning with respect to that. I think certainly that will not be difficult.”

The PCAOB said the amendments will be effective December 31, 2016, pending SEC approval, which is required for all rules from the audit regulator.

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