PCAOB Adopts New Auditing Standards on Risk
Washington, D.C., Aug. 5, 2010
The Public Company Accounting Oversight Board today adopted a suite of
eight auditing standards related to the auditor's assessment of, and
response to, risk in an audit.
The suite of risk assessment standards, Auditing Standards No. 8
through No. 15, sets forth requirements that enhance the effectiveness of
the auditor's assessment of, and response to, the risks of material
misstatement in the financial statements.
The risk assessment standards address audit procedures performed
throughout the audit, from the initial planning stages through the
evaluation of the audit results.
"These new standards are a significant step in promoting sophisticated
risk assessment in audits and minimizing the risk that the auditor will
fail to detect material misstatements," said PCAOB Acting Chairman Daniel
L. Goelzer. "Identifying risks, and properly planning and performing the
audit to address those risks, is essential to promoting investor
confidence in audited financial statements."
The PCAOB initially proposed a suite of standards on Oct. 21, 2008.
Changes were made in response to comments received and the PCAOB
reproposed the standards on Dec. 17, 2009.
These standards supersede six PCAOB interim standards and related
amendments: AU sec. 311, Planning and Supervision; AU sec.
312,Audit Risk and Materiality in Conducting an Audit; AU sec.
313, Substantive Tests Prior to the Balance Sheet Date; AU sec.
319,Consideration of Internal Control in a Financial Statement
Audit; AU sec. 326, Evidential Matter; and AU sec. 431,
Adequacy of Disclosure in Financial Statements.
The standards, if approved by the Securities and Exchange Commission,
will become effective for audits of fiscal periods beginning on or after
Dec. 15, 2010.
The attachment describes each of the eight standards.
Auditing Standards Related to the Auditor's Assessment of, and
Response to, Risk (AS No. 8 through 15)
- Auditing Standard 8 (AS No. 8) - Audit Risk. This standard
discusses the auditor's consideration of audit risk in an audit of
financial statements as part of an integrated audit or an audit of
financial statements only. It describes the components of audit risk and
the auditor's responsibilities for reducing audit risk to an
appropriately low level in order to obtain reasonable assurance that the
financial statements are free of material misstatement.
- Auditing Standard 9 (AS No. 9) - Audit Planning. This
standard establishes requirements regarding planning an audit, including
assessing matters that are important to the audit, and establishing an
appropriate audit strategy and audit plan.
- Auditing Standard 10 (AS No. 10) - Supervision of the Audit
Engagement. This standard sets forth requirements for supervision
of the audit engagement, including, in particular, supervising the work
of engagement team members. It applies to the engagement partner and to
other engagement team members who assist the engagement partner with
- Auditing Standard 11 (AS No. 11) - Consideration of Materiality
in Planning and Performing an Audit. This standard describes the
auditor's responsibilities for consideration of materiality in planning
and performing an audit.
- Auditing Standard 12 (AS No. 12) - Identifying and Assessing
Risks of Material Misstatement. This standard establishes
requirements regarding the process of identifying and assessing risks of
material misstatement of the financial statements. The risk assessment
process discussed in the standard includes information-gathering
procedures to identify risks and an analysis of the identified risks.
- Auditing Standard 13 (AS No. 13) - The Auditor's Responses to
the Risks of Material Misstatement. This standard
establishes requirements for responding to the risks of material
misstatement in financial statements through the general conduct of the
audit and performing audit procedures regarding significant accounts and
- Auditing Standard 14 (AS No. 14) - Evaluating Audit Results.
This standard establishes requirements regarding the auditor's
evaluation of audit results and determination of whether the auditor has
obtained sufficient appropriate audit evidence. The evaluation process
set forth in this standard includes, among other things, evaluation of
misstatements identified during the audit; the overall presentation of
the financial statements, including disclosures; and the potential for
management bias in the financial statements.
- Auditing Standard 15 (AS No. 15) - Audit Evidence. This
standard explains what constitutes audit evidence and establishes
requirements for designing and performing audit procedures to obtain
sufficient appropriate audit evidence to support the opinion expressed
in the auditor's report.