15 February 2012

FEE commented on the PCAOB Rulemaking Docket Matter No 030 on Proposed Auditing Standard related to Communications with Audit Committees

FEE published its comment letter on the PCAOB Rulemaking Docket Matter No 030 on Proposed Auditing Standard related to Communications with Audit Committees, Related Amendments to PCAOB Standards and Transitional Amendments to AU Sec 380.

FEE commends the PCAOB for giving its stakeholders the opportunity to consider the new proposed requirements in relation to auditor’s communication with audit committees. As mentioned in relation to the first exposure of this PCAOB standard, FEE welcomes the initiative to set a standard for auditors’ communication with audit committees. A fruitful two-way dialogue with the entity’s audit committee is an important part of the work of an auditor of public interest entities, and any initiative to strengthen this cooperation is beneficial to both parties. The re-exposed standard introduces enhancements that better enable the audit committee to carry out its monitoring role based on the information received from the auditor.

As the PCAOB may already be aware of, current discussions in Europe also focus on strengthening the role of audit committees. As part of this objective, it is proposed to enhance the communication between the auditor and the audit committee by introducing an additional internal report that the statutory auditor is to submit to the audit committee. The content of this report focuses on the audit and the uncertainties discovered by the auditor, as well as other matters. As audit committees of multinational companies may also be multinational, FEE encourages the PCAOB to work closely with its counterparts in other jurisdictions, for instance the European Commission as well as the IAASB, who are also considering this area.

The PCAOB appears to be updating its various auditing standards at different paces and on different topics. In order to get a coherent set of standards, the PCAOB is encouraged to develop an overall strategy for its standard-setting activities. Such a strategy would allow auditors and other stakeholders to contribute to the prioritisation of these activities. Furthermore, it will facilitate consistency between the different standards.

FEE's general comments on the issues raised in the PCAOB proposed standard that are relevant from a European or international perspective are set out below and can be summarised as follows:

1. A number of the previous concerns expressed by FEE have been acknowledged and addressed as suggested. With certain exceptions, which are discussed below, FEE supports the changes to the standard now proposed.
2. In general, FEE believes that alignment in auditing standards worldwide, to the maximum degree possible, is beneficial for capital market participants with cross-border interests and global activities. The new proposed standard introduces a closer alignment with the equivalent ISAs issued by the IAASB, for instance in relation to the emphasis on two-way communication. However, FEE remains of the view that an even closer alignment could further enhance the communication between the two parties.
3. Although the new proposed standard introduces improvements compared to the first exposure draft, FEE believes that further improvements can be introduced.

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