PCAOB Audit: Do I Need It?
A non-profit body called the Public Company Accounting Oversight Board (PCAOB) is in charge of policing auditors of publicly listed companies.
PCAOB’s main goal is to reduce audit risk. The U.S. Securities and Exchange Commission-registered public corporations, brokers, and dealers are subject to PCAOB oversight of their audits (SEC).
It is important for businesses, accounting services, and audit firms in Malaysia to keep up with the changing requirements and instructions of PCAOB to provide the best services and comply with the industry standards.
There has been a significant update in the PCAOB requirements for auditing accounting practice related to professional auditing procedures and fair value measurements.
The usage of accounting estimates and fair value measurements is also rapidly increasing in financial reporting, so accounting services in Malaysia should pay special attention to these requirements to provide maximum accuracy and efficiency.
It is also important for the auditors to evaluate or oversee the work of the specialists to minimize risks and remove errors from accounting procedures. This article explores these changes and the requirements of PCAOB in detail.
Fair Value Measurements
According to the PCAOB, the new, single standard establishes a consistent, risk-based methodology. It underlines the necessity for auditors to use professional scepticism when examining accounting estimates, particularly taking into consideration any managerial bias.
Moreover, the new standard also offers further guidance on how to handle specific issues specific to auditing the fair values of financial instruments, such as the use of price data from third parties like pricing services, brokers, or dealers.
Auditing the Specialists
The PCAOB said its revisions improve the standards for assessing a business expert’s work, whether that expert is hired or retained by the firm.
The PCAOB said that the modifications are intended to boost audit attention in areas where a specialist is engaged and match the relevant requirements with the PCAOB’s risk assessment criteria.
The changes also utilize a supervisory strategy for professionals who are both hired by and engaged by auditors. Two current auditing standards, AS 1105, Audit Evidence, and AS 1201, Supervision of the Audit Engagement, were modified by the PCAOB.
The new AS 1210, Using the Work of an Auditor-Engaged Specialist, renamed and replaced AS 1210, Using the Work of a Specialist.
The purpose of such amendments to the PCAOB rules is to significantly improve the quality of PCAOB auditing procedures and bring greater transparency to the global audit and accounting standards.
Requirements of the PCAOB Audit
Your Tier 2 Regulation A offering is exempt from PCAOB audits, and, of course, Tier 1 offers are also exempt from audit requirements. However, listing on the top two exchanges requires PCAOB level audits (NASDAQ, NYSE).
For a Reg A+ IPO to the major markets, the offering begins as a straightforward Reg A+, but shortly before the offering is scheduled to list, the structure of the Reg A+ Offering Circular is altered (the content is left unchanged) to resemble an S-1.
Companies must submit a PCAOB audit for the most recent quarter before listing to participate in these IPOs. And the securities lawyer makes a number of files after the listing to effectively upgrade the SEC filings to those of a full reporting public business on a significant exchange.
You must carry out the audit in line with generally accepted auditing standards using the help of an audit firm in Malaysia unless the audit falls within the PCAOB’s purview. The audit may also be carried out in line with PCAOB standards but not only in compliance with those standards.
The PCAOB decides whose financial statement audits are within its purview, including those of issuers and non-issuers, brokers and dealers registered with the SEC.
The audit does not come within the PCAOB’s purview only because a regulator (other than the PCAOB) demands that it be carried out in line with PCAOB standards.
As a result, even when the regulator—for instance, the CFTC—mandates that an audit be carried out in accordance with PCAOB standards, the audit must also be carried out in compliance with GAAS.
The auditor shall utilize the type of report required by the PCAOB standards, modified to specify that the audit was also carried out in compliance with GAAS when referencing the PCAOB standards in addition to GAAS in the auditor’s report.
The bottom line is that PCAOB and other such relevant accounting and auditing authorities play an integral role around the world in monitoring audit firms and maintaining investors’ and the public’s trust in accounting and auditing procedures.
Such rules and regulations allow audit firms in Malaysia to operate within a standard framework and offer reliable services.