On May 7, the PCAOB reproposed auditing standard, related parties, and related amendments, including amendments regarding significant unusual transactions.

According to a report from the Journal of Accountancy, “the reproposed standard is designed to increase the auditor’s focus on the evaluation of how a company identifies, accounts for, and discloses its relationships and transactions with related parties. The reproposed amendments, meanwhile, are intended to help the auditor identify and evaluate a company’s significant unusual transactions. In addition, the reproposed amendments would require the auditor to perform new procedures as part of the process to assess the risk of material misstatement in the financial statements.

These procedures would give the auditor an understanding of a company’s financial relationships and transactions with executive officers, the PCAOB said. But the auditor would not be required to make any determination or recommendation regarding how reasonable the compensation arrangements are.

Several changes in the new proposal include:

  • Clarifying the relationship of the proposal with the PCAOB’s existing risk assessment standards.
  • A requirement to evaluate whether the company has properly identified its related parties and its relationships and transactions with related parties.
  • Removing the requirement that each related-party transaction previously undisclosed to the auditor by management be treated as a significant risk.”

Contact Us

Comments, due July 8, can be made at the PCAOB’s website. If you have questions about this or any other matters, contact your Warren Averett Pender Newkirk partner, or any member of our SEC Practice Division at (813) 229-2321.