| PCAOB’s Greg Scates Addressed Auditing Section Luncheon at the Annual Meeting in Honolulu
Greg Scates, an Associate Chief Auditor at the Public Company Accounting Oversight Board (PCAOB), served as the Auditing Section’s luncheon speaker at the AAA Annual Meeting in Hawaii. Mr. Scates is one of four professional staff in the PCAOB’s Office of the Chief Auditor, reporting directly to Dr. Douglas Carmichael. Mr. Scates briefly discussed the origins of the PCAOB, who serves on the Board, and how the Board is funded. He indicated that the PCAOB has four responsibilities: (1) registration of public accounting firms that audit issuers, (2) inspections of registered public accounting firms, (3) investigation and enforcement, and (4) setting auditing, quality control, ethics, and independence standards. All U.S. accounting firms that audit U.S. public companies must be registered with the PCAOB by October 22nd of this year—foreign accounting firms that audit U.S. issuers have until April 19, 2004 to register. Accounting firms that audit 100 or more issuers will be inspected annually, and firms that audit fewer than 100 companies will be inspected once every three years. Mr. Scates devoted most of his talk to the Board’s plans for setting auditing and other professional standards. The PCAOB has adopted the AICPA’s auditing, quality control, and ethics standards on an interim basis, and has adopted independence standards from the AICPA and the Independence Standards Board, also on an interim basis. The Board will focus its initial standard-setting efforts in three areas: (1) developing standards mandated by the Sarbanes-Oxley Act, (2) reviewing existing auditing standards, and (3) establishing new standards. The Sarbanes-Oxley Act requires the PCAOB to develop standards that guide auditors in reporting on managements’ reports on internal control over financial reporting. The Act also requires the Board to develop standards related to retention of audit working papers, second partner review, and quality control. Although the PCAOB eventually will review all existing auditing standards, the Board will focus its initial efforts on reviewing the auditing standards and guidance related to financial fraud, confirmations, and materiality. Finally, the Board, in establishing new standards, will look first to providing guidance related to auditing revenue and reserves. The Auditing Section greatly appreciates the willingness of Greg Scates to fly to Hawaii to provide our members with an update on the activities of the PCAOB. |
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