Alerts

PCAOB Proposes New Confirmation Standard to Reduce Risk of Financial Statement Inaccuracy

August 3, 2010

The Public Company Accounting Oversight Board (“PCAOB”) has proposed a new standard designed to strengthen requirements for audit confirmations—that is, direct auditor communication with third parties about particular items affecting the audit client’s financial statements. Recognizing that audit evidence from third parties often is more reliable than evidence generated internally or provided by a client, the PCAOB proposed the new standard to reduce the risk of material misstatement due to fraud or error and resulting in improper revenue recognition. Subject to public comment and Securities and Exchange Commission approval, the new standard would replace existing confirmation requirements for audits for fiscal years ending on or after Dec. 15, 2011.