IASB News
Focus to Shift from New Standards to Improving Communication
Now that the IASB has finished its “big four” accounting standards—leases, revenue, insurance, and financial instruments—it is now focusing not on crafting new rules but on improving how existing standards communicate information, IASB Chairman Hans Hoogervorst said on June 29. The IASB has started researching what it calls issues about “broader corporate reporting,” including whether the board should take a role in developing benchmarks to report sustainability information as well as whether it should put parameters around non-GAAP measures, such as earnings before interest and taxes (EBIT). “Rather than developing, yet again, major cross-cutting standards, in the next couple of years we will try to focus more on improving what is already there,” Hoogervorst said in his prepared remarks delivered at the IFRS Foundation Conference in Amsterdam. “We feel we can do more to improve the communication effectiveness of the financial statements.”
PCAOB News
Broker-Dealer Inspections to Focus on Problem Areas
On June 29, the PCAOB published a staff inspection brief with details about the inspections of auditors of broker-dealers it plans to carry out in 2017. The audit regulatory board expects to focus on areas where the inspection staff has previously found problems, including auditor independence, engagement quality reviews, and financial reporting issues, including revenue recognition and related-party transactions. “The intent of these staff inspection briefs is to help audit firms, investors, and others better understand how the PCAOB approaches audit firm inspections,” Helen Munter, the audit regulator’s director of registration and inspections, said in a statement. The PCAOB plans to inspect 75 accounting firms that audit broker-dealers, covering parts of 115 audits during the 2017 inspection cycle. This includes four firms that audit more than 100 broker-dealers, 16 firms that audit 21 to 100 broker-dealers, and 55 firms that audit one to 20 broker-dealers.
Inspections Continue to Find Deficiencies in Broker-Dealer Audits.
The PCAOB continued to find deficiencies in the audits of broker-dealers, according to a preview of the inspections it carried out in 2016. Some auditors still had problems maintaining independence from their broker-dealer clients and did not perform sufficient audit procedures scrutinizing revenue recognition. PCAOB Rule 3520, Independence, requires registered accounting firms to be independent of their audit client. They also must comply with the SEC’s independence criteria established in Rule 2-01 of Regulation S-X. “An auditor is not independent of its client, including its broker or dealer client, if the auditor maintains or prepares the client’s accounting records, prepares the client’s financial statements that are filed with the SEC, or prepares or originates source data underlying the client’s financial statements,” the PCAOB brief said. The PCAOB staff inspected 75 accounting firms, covering parts of 115 audit and attestation engagements for fiscal years that ended during the period from June 30, 2015, through June 30, 2016. In total, 541 accounting firms issued audit reports of 3,958 broker-dealers.
