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Recent Regulatory Efforts – What is the Nexus to Audit Quality?

Recent Regulatory Efforts – What is the Nexus to Audit Quality?. Panelists: Denny Beresford, University of Georgia Bill Platt, Deloitte LLP Moderator: Cindy Fornelli, Center for Audit Quality AAA Auditing Section Mid-Year Meeting January 13, 2012. Auditor-Audit Committee Communications.

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Recent Regulatory Efforts – What is the Nexus to Audit Quality?

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  1. Recent Regulatory Efforts – What is the Nexus to Audit Quality? • Panelists: • Denny Beresford, University of Georgia • Bill Platt, Deloitte LLP • Moderator: • Cindy Fornelli, Center for Audit Quality • AAA Auditing Section Mid-Year Meeting • January 13, 2012

  2. Auditor-Audit Committee Communications • PCAOB issued reproposed standard Dec. 20; comments due Feb. 29 • Seeks to enhance relevance and quality of communications between auditor and AC • New requirement that auditor communicate to AC any significant unusual transactions • Reproposal reflects PCAOB’s oversight of Broker-Dealers, implementation of new risk assessment standards • Requirement in original proposal that auditors evaluate two-way communications process deleted • Requirements concerning auditor communications regarding management’s CAE streamlined

  3. Mandatory Firm Rotation • All in process share common goal of increasing audit quality, of which skepticism and objectivity are key components • Further, MFR would undermine the authority and responsibilities of audit committee • No studies suggest a negative correlation between audit quality and long-tenured engagements • Majority of comment letters received were critical of MFR as a solution • CAQ, NACD and others are developing constructive ideas to increase objectivity and skepticism • PCAOB Roundtables beginning in March

  4. Auditor’s Reporting Model • PCAOB will issue proposed standard in Q2 2012 • CAQ comment letter on concept release included proposals for consideration: • Auditor association with Critical Accounting Estimates disclosure in MD&A • Use of expanded emphasis paragraphs in the audit report • Addition of clarifying language to standard audit report • One approach raised by the PCAOB – an Auditor’s Discussion & Analysis – is problematic

  5. Implications for the Future? Other proposals – PCAOB Engagement Partner Identification proposal, European Commission legislation • If all that we’ve discussed today is enacted, what are the implications for the profession? • What are the implications for the academic community? • What will the impact be on the pipeline? • Do new regulatory proposals present opportunities for research?

  6. The System of Investor Protection Implications for the Future? To view the video, please click the link below: http://www.CAQforinvestors.org/

  7. The System of Investor Protection

  8. COMING SOON – Ledger & team in a new video!

  9. www.TheCAQ.orgTwitter: @theCAQ

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