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New standard to improve auditor relationships

A new standard from the Public Company Accounting Oversight Board will improve

The corporate accounting community received some good news recently when it was announced that the Public Company Accounting Oversight Board had approved a new standard that will improve the way audit committees and external auditors communicate with one another.

While the standard does not implement any new audit procedures, it does encourage earlier communication between audit committees and auditors. Among the topics stakeholders would be encouraged to discuss are the terms of the audit, the responsibilities of the auditor and any concerns that may arise over the course of the financial reporting cycle. For example, auditors will have to inform companies of any risks they may have identified and ask what steps the company plans to take to address those risks before finalizing their conclusions.

"I believe the standard moves the auditor's communication with the audit committee away from compliance checklists and decisively in the direction of meaningful, effective interchange," said PCAOB Chairman James Doty in a statement.

Auditing Standard No. 16, as it is called, will go into effect for audits beginning on or after December 15, 2012, and reflects some of the provisions of both the Sarbanes-Oxley Act and the Dodd-Frank Act.

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