Printer Friendly

The next big issue to impact the profession.

For years CPAs have discussed the relative merits of Big ISAAP vs little GAAP. Everyone has an opinion, and the implications both pro and con can be anticipated and visualized. However, most of us (excluding those who perform GAO audits) haven't given much thought to the possibility of having two or more different sets of auditing standards.

Should there be one set of audit standards, or two? This seemingly short and simple question has far reaching impact on the CPA profession and the business world. However, this is not a question that remains to be answered. The Sarbanes-Oxley legislation has eliminated most of the discussion on this subject. The law of the land says that the Public Company Accounting Oversight Board (PCAOB) has the sole and exclusive power to set auditing standards for audits of "registered" companies. It is also important to understand that the same law has no authority over unregistered companies and makes no changes to the role of the Auditing Standards Board (ASB) as the recognized standard setting body for "unregistered" companies.

So, let's be clear. By law there are two sets of auditing standards, During a transitional period, the PCAOB has directed auditors of registered companies to continue to use the existing ASB standards until such time as they can issue new standards, but nobody expects this position will last indefinitely. The PCAOB has at least three courses of action it can take. It can:

1) permanently adopt some or all of the current standards promulgated by the ASB,

2) incorporate and reference the existing ASB auditing standards and create new standards that modify or supercede the existing standards that will apply only to registered companies (we call this the "core plus" approach), or

3) create from scratch all new auditing standards to be followed by registered companies.

Further complicating the issue are the actions some states have taken following the enactment of Sarbanes-Oxley to place additional requirements on auditors of companies located under their jurisdiction.

The core plus approach seems to be the rational choice to address the diverging audit needs of registered and non-registered companies while maximizing the consistency in the auditing standards, but many believe it is unlikely to become a viable option. In any of the scenarios above the fact remains that the ASB needs to continue setting standards for audits of non-registered companies.

It would seem the only way we can have a single set of auditing standards is for either PCAOB or the ASB to formally adopt the other organization's standards to be followed by all companies. It appears unlikely that the PCAOB will do this. So, should the ASB relinquish their role in creating auditing standards and replace the existing body of standards with those created by PCAOB just so the profession and the public we serve will have fewer organizations promulgating auditing standards? I find that possibility equally unlikely.

The issue is complex, and it is the focus of this issue's cover story (See A Brave New World. The Future of Audit Standards on page 8). To boil it down, one set of standards would be easier to develop, maintain, and understand, but could be difficult to achieve because of the expected increased cost of compliance as a result of additional scrutiny demanded by the public for audits of registered companies.

Two sets of auditing standards would be accommodating to unregistered companies but potentially confusing to users of financial statements further damaging the expectations gap that already exists.

The extent of our ability to influence the PCAOB is limited and this issue won't likely come before us as a membership vote of the AICPA or Ohio Society, but, you can still weigh in on the issue and I encourage you to share your thoughts with us. It's important for us all to be aware and informed. The final decision will impact all of us, not only through our profession, but through the business community and economic and market reactions to any changes. We will leave the discussion on accounting standards (Big GAAP vs. Little GAAP) for another day.

To stay abreast of the latest issues, go to www.ohioscpa.com and click on "Restoring Confidence, Rebuilding Trust." There you will find all of the latest headlines regarding the PCAOB and pending issues and proposed regulations. The Ohio Society will also be hosting another series of Town Hall Meetings this fall to bring members together to discuss this very subject. But don't wait until then to engage in this discussion. Send us a letter to the editor. Vote in one of our Web polls. Make your voice heard.

Michael R. Dickson, CPA, CITP

Chair of the Board

The Ohio Society of CPAs

Editor's note: Letters to the editor can be sent electronically to catalyst@ohiocpa.com or to the Society's office at 535 Metro Place South, Dublin, OH 43017.
COPYRIGHT 2003 Ohio Society of Certified Public Accountants
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2003 Gale, Cengage Learning. All rights reserved.

 Reader Opinion

Title:

Comment:



 

Article Details
Printer friendly Cite/link Email Feedback
Title Annotation:auditing standards different for registered companies and unregistered companies; A message from the Chair
Author:Dickson, Michael R.
Publication:Catalyst (Dublin, Ohio)
Geographic Code:1USA
Date:Sep 1, 2003
Words:810
Previous Article:Gain an edge: educational opportunites.
Next Article:Activities in your area--information now online.
Topics:


Related Articles
New millennium is cause for concern.
Concerns over auditing quality complicate the future of accounting.
The future of corporate reporting: from the top. (Financial Reporting).
The PCAOB and tax services.
New world order: as the PCAOB takes shape, the AICPA's role is blurred.
A brave new world: the future of audit standards: the pace and breadth of change in the CPA profession over the past 18 months has been...
Playing a leadership role in international convergence: a chance to set an example on the world stage.
Assessing the risk: new standards mean more time with your CPA.

Terms of use | Copyright © 2014 Farlex, Inc. | Feedback | For webmasters