Order dating timing standards
Audits and reviews of issuers' financial statements will now, under the Act, be subject to review by PCAOB inspectors.
Therefore, a documentation standard that enables an inspector to understand the work that was performed in an audit or review is appropriate. Accordingly, the Board's proposed standard would have required that audit documentation contain sufficient information to enable an experienced auditor, having no previous connection with the engagement, to understand the work that was performed, the name of the person(s) who performed it, the date it was completed, and the conclusions reached.
Audit programs were specifically mentioned in SAS No. Audit programs may provide evidence of audit planning as well as limited evidence of the execution of audit procedures, but the Board believes that signed-off audit programs should generally not be used as the sole documentation that a procedure was performed, evidence was obtained, or a conclusion was reached.
An audit program aids in the conduct and supervision of an engagement, but completed and initialed audit program steps should be supported with proper documentation in the working papers. The proposed standard would have adapted a standard of reviewability from the U. General Accounting Office's ("GAO") documentation standard for government and other audits conducted in accordance with generally accepted government auditing standards ("GAGAS").
The standard now describes an experienced auditor as one who has a reasonable understanding of audit activities and has studied the company's industry as well as the accounting and auditing issues relevant to the industry. Some commenters also suggested that the standard, as proposed, did not allow for the use of professional judgment. Auditors exercise professional judgment in nearly every aspect of planning, performing, and reporting on an audit.
These commenters pointed to the omission of a statement about professional judgment found in paragraph 4.23 of GAGAS that states, "The quantity, type, and content of audit documentation are a matter of the auditors' professional judgment." A nearly identical statement was found in the interim auditing standard, SAS No. Auditors also exercise professional judgment in the documentation of an audit and other engagements.
Based on comments made at the roundtable, advice from the Board's staff, and other input the Board received, the Board determined that the pre-existing standard on audit documentation, Statement on Auditing Standards ("SAS") No.
96, , was insufficient for the Board to discharge appropriately its standard-setting obligations under Section 103(a) of the Act.
Those commenters argued that not allowing oral explanations when there was no documentation would essentially make the presumption "irrebuttable." Moreover, those commenters argued that it was inappropriate for a professional standard to predetermine for a court the relative value of evidence. The Board believes that complete audit documentation is necessary for a quality audit or other engagement.Meaningful reviews, whether by the Board in the context of its inspections or through other reviews, such as internal quality control reviews, would be difficult or impossible without adequate documentation.Clear and comprehensive audit documentation is essential to enhance the quality of the audit and, at the same time, to allow the Board to fulfill its mandate to inspect registered public accounting firms to assess the degree of compliance of those firms with applicable standards and laws. The Board began a standards-development project on audit documentation by convening a public roundtable discussion on September 29, 2003, to discuss issues and hear views on the subject.One commenter suggested that an auditor who is reviewing audit documentation should have experience and knowledge consistent with the experience and knowledge that the auditor performing the audit would be required to possess, including knowledge of the current accounting, auditing, and financial reporting issues of the company's industry.Another said that the characteristics defining an experienced auditor should be consistent with those expected of the auditor with final responsibility for the engagement. After considering these comments, the Board has provided additional specificity about the meaning of the term, .