In October, 2008, the Public Company Accounting Oversight Board (PCAOB) initially proposed for comment a suite of seven standards that focus on the risk assessment process and on the auditor’s response to identified risks.  Recently, the PCAOB voted to repropose these standards to reflect changes made in response to comments received on the original proposal and other refinements. Like the original proposal, the reproposed standards would establish requirements for audit procedures performed throughout the audit, from the initial planning stages through the evaluation of the audit results in forming the opinion in the auditor's report.
The reproposed standards are intended to improve audits of issuers by enhancing the effectiveness of an auditor’s assessment of and response to risk. The revised standards are not fundamentally different in approach from the first version. The new standards do, however, reflect numerous enhancements and clarifications, including the following:

• The proposed standards have been revised to better align with Auditing Standard No. 5, An Audit of Internal Control Over Financial Reporting That Is Integrated with An Audit of Financial Statements.
• The revised standards more explicitly emphasize the need to evaluate financial statement disclosures as part of assessing the risk of material misstatement. Consideration of whether financial statements are fairly stated includes an evaluation of the adequacy of disclosures in the notes, not just of the numbers on the face of the statements. Focusing during the planning stage on the importance of disclosures can improve the auditor’s approach to testing and to evaluating audit results.
• The new proposed standards also contain stronger requirements relating to the auditor’s responsibility to consider the possibility of fraud. These include increased emphasis on consideration of potential management bias and of risks related to missing or incomplete disclosures.

The revised proposals also take some additional steps to further reduce differences between these standards and International Standards on Auditing (ISAs).  The document includes an appendix that provides a high-level comparison between the revised proposals and the ISAs.

The revised proposals are available for comment until March 2, 2010

Any new auditing standard or amendment to a PCAOB standard that is adopted also must be submitted to the SEC for approval before becoming effective.

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