Issues Publication Comparing IAASB and PCAOB Approaches
The International Auditing and Assurance Standards Board welcomes the release by the US Public Company Accounting Oversight Board (PCAOB) of its re-proposed auditing standard, The Auditor's Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion. The PCAOB’s reproposal would require auditors conducting audits under PCAOB standards to provide information on critical audit matters (CAM) in the auditor’s report, in addition to other enhancements.
In September 2014, the IAASB finalized its new and revised Auditor Reporting Standards, which will be effective for December 2016 year-end audits. The IAASB’s most notable enhancement is the communication of Key Audit Matters (KAM) for listed entities.
“The IAASB is delighted to see the many similarities between the PCAOB’s reproposal and the IAASB’s standards. Comparable approaches to auditor reporting around the world will clearly benefit investors and is in the public interest. We commend the PCAOB for taking steps to enhance transparency for investors and to further global consistency,” said Prof. Arnold Schilder, IAASB Chairman. “We have heard from early adopters around the globe that enhanced communication in the auditor’s report has reinvigorated discussions with management and audit committees and inspired auditors to be innovative in their auditor’s reports.”
The IAASB’s Auditor Reporting Implementation Working Group (ARIWG) has prepared a publication, The New Auditor’s Report: A Comparison between the ISAs and the PCAOB Reproposal, to assist interested parties in understanding key aspects of the two proposals. Dan Montgomery, Chair of the Working Group, noted, “It is beneficial that both the IAASB and PCAOB approaches look to communications with those charged with governance as the starting point to determine matters for inclusion in the auditor’s report, as investors have long asked for greater transparency about the types of matters that are discussed with the audit committee. While the two approaches may differ somewhat in terms of definitions and the decision-making process, we believe that many of the same types of matters will ultimately be communicated.”
Kathleen Healy, IAASB Technical Director, highlighted, “The IAASB devotes much attention to outreach and coordination with the PCAOB and other regulators and standard setters, as well as with a variety of other important stakeholders, including investors and firms. This reflects the importance we attach to achieving auditing standards that can be applied consistently in a complex, evolving global environment, and facilitates convergence.”
The IAASB is an observer to the PCAOB Standing Advisory Group (SAG) and Prof. Schilder recently presented at the May 18–19 SAG meeting on topics of mutual interest and ongoing coordination. The PCAOB also participates as an observer to the IAASB’s Consultative Advisory Group.
To access to the new and revised IAASB Auditor Reporting standards, more information about the changes to the auditor’s report, and other Auditor Reporting toolkit materials, please visit the IAASB website.
About the IAASB
The IAASB develops auditing and assurance standards and guidance for use by all professional accountants under a shared standard-setting process involving the Public Interest Oversight Board, which oversees the activities of the IAASB, and the IAASB Consultative Advisory Group, which provides public interest input into the development of the standards and guidance. The structures and processes that support the operations of the IAASB are facilitated by the International Federation of Accountants (IFAC).
The International Federation of Accountants® (IFAC®) is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of over 175 members and associates in over 130 countries and jurisdictions, representing almost 3 million accountants in public practice, education, government service, industry, and commerce.
 International Standard on Auditing (ISA) 701, Communicating Key Audit Matters in the Independent Auditor’s Report, defines KAM as “those matters that, in the auditor’s judgment, were of most significance in the audit of the financial statements of the current period. Key audit matters are selected from the matters communicated with those charged with governance.”
 The ARIWG was formed in 2014 to support the implementation of the IAASB’s Auditor Reporting Standards. This group is co-chaired by former IAASB Deputy Chair Dan Montgomery, currently a member of the American Institute of CPA’s Auditing Standards Board, and Jim Sylph, former IFAC Executive Director, Professional Standards and External Relations.