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In light of the revised PCAOB reporting standard and guidance adopted in June 2017, Interpretation 4 contains a short series of questions and answers and several illustrative audit reports to provide additional guidance intended to facilitate auditor compliance with AU-C section 700.44.Īs set forth in Interpretation 4 (AUC 9700.17), if the firm reporting on an audit conducted under dual standards is not a PCAOB-registered firm, the report should be titled the same way as a GAAS-only report if the firm is registered, the report may (but is not required to) be titled as would be required for a PCAOB-only report.Īlso according to Interpretation 4 (AU-C 9700.19), it would be appropriate in a dual standard report for an auditor to revise the independence-related statement ordinarily prescribed by AS 3101 to reflect the circumstances of the engagement to read, for example, “We are required to be independent with respect to the Company in accordance with the relevant ethical requirements relating to our audit.” According to GAAS (AU-C 200.A15), the relevant ethical requirements consist of the AICPA Code of Professional Conduct and any and all applicable, more restrictive regulatory rules of state boards of accountancy and any other agencies. The essence of SAS 131 is that even when reporting on an audit conducted for an entity not subject to PCAOB oversight, the report must nevertheless be in accordance with PCAOB standards, modified by adding a reference to GAAS.ĭespite the apparent simplicity of SAS 131, the ASB issued Auditing Interpretation 4, “Reporting on Audits Conducted in Accordance With Auditing Standards Generally Accepted in the United States of America and the Standards of the PCAOB,” in March 2018. One may also conduct an audit in accordance with PCAOB standards if required, for example, by a lender, a regulator, or merely the terms of the engagement however, one cannot conduct an audit not subject to PCAOB oversight solely in accordance with PCAOB standards as an alternative to GAAS. entity’s financial statements in accordance with GAAS as promulgated by the ASB. Unless an audit is within the jurisdiction of the PCAOB (i.e., for an SEC issuer, as defined by the SEC and PCAOB, or a securities broker-dealer), one is required by the Code of Professional Standards (ET section 1.310.001.01 and Appendix A thereto) to conduct an audit of a U.S. That changed with the issuance of SAS 131, but only with regard to the PCAOB. Because the PCAOB had no jurisdiction over these audits, intuitively, one would expect the reports to be based on the ASB reporting model consequently, as remains the practice with international or Yellow Book standards, auditors generally prepared them in GAAS format with a reference to PCAOB standards added. GAAS merely stated that both sets of standards (and their origin) should be identified in the report it was otherwise silent as to the form of the report to be used. Prior to this, reporting on an audit conducted in accordance with both sets of standards presented auditors with the dilemma of determining which body’s reporting standard should control the content of the report-since it has always been impossible to comply with two different reporting models in a single report.īefore SAS 131, GAAS (AU-C 700.42–43 and its predecessors) afforded limited guidance as to reporting on audits conducted in accordance with dual standards citing, for example, international standards, PCAOB standards, and Government Auditing Standards. A63), effective for audits of financial statements for periods ending on or after June 15, 2016. In January 2016, the ASB issued Statement on Auditing Standards (SAS) 131 (AU-C sections 700.44. ![]() GAAS, promulgated by the AICPA’s Auditing Standards Board (ASB), and the auditing standards of the PCAOB. As noted by the PCAOB in its Release 2017-001: “there are situations in which an auditor may be required by law or regulation, or voluntarily agrees, to perform an audit engagement in accordance with PCAOB standards for a company whose audit is not subject to PCAOB oversight.” In such instances, audits are commonly conducted under dual auditing standards, generally including U.S.
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