Pcaob standard setting process and recent standards
Generally, PCAOB is mandated to develop policies and standards that help in guiding the auditing discipline in the USA, to make the work of auditors transparent. In coming up with various standards on auditing practice, the PCAOB follows certain procedures to endure the end results are standards that are mutually binding and are making economic sense. Therefore, this paper will aim at discussing the PCAOB's standard-setting process and also, discuss the recent accounting standards that were developed and enacted by this body. The Public Company Accounting Oversight Board Standard-Setting Process The PCAOB is generally funded by the fees and charges from various public companies. As such, the board recovers the costs of reviewing an accounting company registration and processing costs of relevant documents from the registration fees that the respective companies have paid.
As such, PCAOB majors on a priority-based approach when developing standard-related projects (Gimbar, Christine, Hansen, and Ozlanski 2016). Additionally, the timing of either standard-setting stage may vary from one stage to another and this is caused by the varying scope and nature of audit and accounting issues involved at a particular stage of the standard-setting process. Step One; Understanding Current or Emerging Issues Every industry has current trends which it must be wary of. As such, PCAOB as an organization operating in the accounting and auditing industry is faced with certain issues it is required to incorporate in its standards and policies. The reason why these emerging trends need to be considered is so that the firm or organization keeps on with the changes as and when they occur.
Therefore, key concepts that are very crucial in the first stage of PCAOB's standard-setting include; obtaining intelligence on or identification of emerging auditing issue that require legislation and the board determining whether or not to carry on with the identified issues to the research project. Step Two; Research projects The research projects form the second step in the development of standards by PCAOB. After the interdivision team has identified the emerging issues in the industry, the team then presents its report to the board for deliberations. The board, therefore, meets to deliberate over the identified issues and picks out those that need immediate action and implementation. For this to be successful, however, the board must look at the emerging needs in the auditing industry and also, look at the prevailing standards affecting the particular issues which have been identified by the interdivision team.
In this phase, after deciding on the standard-setting projects to be considered for incorporation in the already existing list of standards by the board, the board embarks on the public participation exercise (Bédard, Coram, Espahbodi, and Mock 2016). The board believes that a proper standard policy must be that which is supported by the public to help develop the auditing industry. Public participation is important because the process helps the PCAOB receive different views of public members who will be affected by the new amendments to its standards. Thus, the board receives public input on the proposed new standards or amendments, and in case of any ambiguities, they are explained at this stage once and for all. Furthermore, in considering the policy changes and amendments, the board conducts a comprehensive economic analysis and analyzes the potential impact of the recommended auditing changes on the new and developing auditing firms (Flesher, Flesher, and Previts 2018).
In passing this amendment, the board aimed at enhancing the security of investors who have put their money in various companies by emphasizing on the need to evaluate the works of a company's specialist who is the auditor attached to the specific firm. The end result of passing this amendment is that the auditing field will have uniform and standard accounting and auditing practices irrespective of the firm's size. It also resulted in the improvement of the credibility and quality of the information contained in the financial statements ("Recently Completed Standard-Setting Activities", 2019). The need for the use of specialists was informed by the requirement to help companies project financial estimates which could make their financial statement reflect current and future accurate information.
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