With its new audit standards and amendments aimed at specific transaction types, the Public Company Accounting Oversight Board (“PCAOB”) has targeted three critical areas in its ongoing efforts to combat financial reporting fraud. A more comprehensive article found here describes the new rules to heighten auditor scrutiny regarding (i) related-party deals, (ii) significant unusual transactions, and (iii) financial relationships with executives.
The new rules will need to be approved by the SEC, but are expected to become effective for audits of interim financials and financial statements involving fiscal years beginning on or after December 15, 2014. As previously described by the SEC, the auditor is
“the only professional that a company must engage before making a public offering of securities and the only professional charged with the duty to act and report independently from management”.
This increased scrutiny should improve the critical gatekeeping function played by auditors.