Access the PCAOB Website ( www.pcaob.org) and list two new or proposed auditing standards issued by the PCAOB.
Auditing Standard no .18: Related Parties
The Securities and Exchange Commission (SEC) approved a new Public Company Accounting Oversight Board (PCAOB) standard on auditing transactions with related parties and amendments to PCAOB standards on significant unusual transactions and a company’s transactions and financial relationships with its executive officers. The standard includes new requirements for evaluating how a company identifies, accounts for and discloses its transactions and relationships with related parties. The amendments also require auditors to perform procedures to
(1) help them identify and evaluate the business purpose of the significant unusual transaction
(2) Obtain understanding of a company’s financial relationship with its executive officers and also understanding their employment contracts.
The PCAOB developed this standard and amendment to focus on the auditor’s areas that have been associated with risks and fraudulent financial reporting errors, the PCAOB hopes the new standard will increase the auditors like hood to identify material misstatement on financial statements. Auditing Standard (AS) No.18, Related Parties, will supersede an interim auditing standard and is effective for fiscal year beginning on or after December 15, 2014. The PCAOB noticed the existing standard provided example of procedures an auditor could perform but did not require specific procedure therefor; the PCAOB provided the following procedures to follow.
• Evaluate and understand a company’s process in identifying, authorizing, and approving accounts for and disclose related party transaction relationship and transactions.
• Perform specific inquiries in upper management regarding company’s related parties.
• Communicate any relevant