Audit Standards Update
Monday, January 22nd, 2007Board Issues Report on Auditors’ Implementation of PCAOB Standards Relating to Auditors’ Responsibilities With Respect to Fraud
Washington, DC, January 22, 2007 – The Public Company Accounting Oversight Board today issued a report that discusses auditors’ implementation of PCAOB interim standards regarding the auditor’s responsibility with respect to fraud.
The auditor’s responsibility with respect to the detection of fraud is an important focus of the Board and has been discussed by the Board’s Standing Advisory Group in past meetings. The report draws on important or recurring observations made during the Board’s inspection of audit work performed by registered public accounting firms. Using those observations as a focal point, the report addresses several topics, including –
- Auditor’s Overall Approach to the Detection of Financial Fraud
- Required Brainstorming Sessions and Fraud-Related Inquiries
- Auditor’s Response to Fraud Risk Factors
- Financial Statement Misstatements
- Fraud Associated with Management Override of Controls
In the report, the Board is not changing or proposing to change any existing standard, nor is the Board providing any new interpretation of any existing standards. The Board issued the report both for the purposes of generally focusing auditors on being diligent about their responsibilities as they relate to fraud and providing information that audit committees may find useful in working with auditors.
“This report is a constructive way to remind all auditors of what the Board’s standards require of them in these areas,” said PCAOB Chairman Mark Olson. “Careful attention to these requirements is important to best position auditors to detect material misstatements caused by fraud.”
The report is a general report under the Board’s Rule 4010 and does not identify any firm or firms to which the inspection observations in the report relate. The text of the report is available on the Board’s Web site here.
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