In light of the Financial Accounting Standards Board’s (FASB) issuance of Statement of Financial Accounting Standards No. 154, Accounting Changes and Errors Corrections, the Public Company Accounting Oversight Board (PCAOB) has adopted the Auditing Standard No. 6, Evaluating Consistency of Financial Statements, as well as an accompanying set of amendments.
“Auditing Standard No. 6 will improve the quality of the auditor’s reporting
on items that affect the consistency of financial statements, such as a
company’s adoption of new accounting principle or its correction of a material
misstatement,” explained Mark Olson, PCAOB chairman. “Investors should benefit
from these improvements.”
The new standard and related amendments update the auditor’s responsibilities
to evaluate and report on the consistency of a company’s financial statements
and align the auditor’s responsibilities with SFAS No.154.
Also, PCAOB removed the hierarchy of generally accepted accounting principles
(GAAP) from its interim auditing standards. The GAAP hierarchy identifies the
sources of accounting principles and the framework for selecting principles to
be used in preparing financial statements. Because FASB intends to incorporate
the hierarchy in the accounting standards, it no longer needed to be in the
Auditing Standard No. 6 and the amendments will become effective 60 days
after approval from the Securities and Exchange Commission (SEC).