On August 13, the Public Company Accounting Oversight Board ("PCAOB" or the “Board”) proposed for public comment a new auditing standard, The Auditor’s Responsibilities Regarding Other Information in Certain Documents Containing Audited Financial Statements and the Related Auditor’s Report, and related amendments (the "proposed standard") that would require the auditor to perform additional procedures with respect to other information, and to communicate certain information in the auditor’s report.
The PCAOB issued the proposed standard concurrently with its proposed auditing standard, The Auditor’s Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion (See In brief 2013-40 dated August 16, 2013 for further details).
The proposed standard would apply to the auditor’s responsibility with respect to other information in a company’s annual report that is filed with the Securities and Exchange Commission (SEC) under the Securities Exchange Act of 1934 and that contains the company’s audited financial statements and the related auditor’s report. As a result, it applies to other information that is incorporated by reference and is available prior to the issuance of the auditor's report but does not extend to annual reports that are distributed by other means, such as corporate websites or social media. It also does not apply to other information contained in 1933 Act registration statements.
Evaluating the other information
The proposed standard would require the auditor to evaluate whether the other information contains (1) a material inconsistency; (2) a material misstatement of fact; or (3) both by performing certain procedures. In addition to reading the other information, the auditor would be required, based on relevant audit evidence obtained and conclusions reached during the audit, to evaluate the:
The proposed standard would require the auditor to include, among other matters, in a separate section of the auditor's report titled "The Auditor's Responsibilities Regarding Other Information," the following:
The statement in item (1) of this bullet point would also be appropriate in situations in which the auditor has identified a material inconsistency, a material misstatement of fact, or both that management has revised appropriately prior to the issuance of the auditor's report.
The proposed standard is applicable to audits conducted in accordance with PCAOB standards; however, the Board is soliciting comments on whether the proposed standard is appropriate for audits of brokers and dealers and audits of emerging growth companies (EGCs).
The proposed standard would be effective, subject to approval by the SEC, for audits of financial statements for fiscal years beginning on or after December 15, 2015.
Comments on the proposed standard are due on December 11, 2013.
PwC clients who have questions about this In brief should contact their engagement partner. Engagement teams that have questions should contact the National Professional Services Group (1-973-236-7800).
James D. Anderson
Julie Anne Dilley