By John Filar Atwood
The PCAOB is asking for the public’s help in its effort to modernize interim attestation standards that have not been updated since their 2003 adoption. The request for comment is seeking information on the use of attestation reports, current practices related to attest engagements, potential updates to requirements relevant to attest engagements, and data about the possible economic implications of standard setting on this issue.
The PCAOB said that the request for comment is part of its effort to modernize outdated standards. The current interim attestation standards were adopted from the American Institute of Certified Public Accountants in 2003 and have continued in effect substantially as they were adopted.
How the standards function. Accounting firms are sometimes engaged to examine and report on matters outside of an audit of financial statements. The engagements include examination, review, and agreed-upon procedures engagements, which involve issuing a report or making an assertion on subject matter that is the responsibility of another party (attest engagements).
The subject matter of an attest engagement may relate to, among other things, a company’s compliance with laws and regulations or a company’s historical data or measures that are evaluated against certain criteria. According the PCAOB, an examination attest engagement provides reasonable assurance, a review attest engagement provides moderate assurance, and an agreed-upon procedures attest engagement does not provide specific assurance but involves a report on the performance of specified procedures and the resulting findings.
Use of attestation reports. The PCAOB staff is requesting comments on how attestation reports are used and what role they play in informing and protecting investors. In particular, the staff would like details on who, other than regulators, are the users of attestation reports and how they benefit from them.
In addition, the staff asked whether users of attestation reports influence the type of attest engagements performed and which attestation reports investors find to be most useful in making investment decisions. The staff also wants to know whether changes to PCAOB attestation standards could help to inform or protect investors.
Current practice. The staff is seeking additional information about whether and how the PCAOB attestation standards are used, including current and emerging circumstances that give rise to such engagements.
The staff noted that it is aware of attest engagements being performed under AT 101, AT 201, and AT 601, and understands that such engagements primarily involve examination and agreed-upon procedures reports. Many of the engagements are compliance attest engagements and relate to examinations of securities and similar investments held by an investment company subject to the requirements of Investment Company Act Rule 17f-2, or for asset-backed security issuers, the assessment of compliance with the servicing criteria of SEC Regulation AB. However, the staff is currently unaware of recent attest engagements under AT 301, AT 401, or AT 701 related to financial forecasts and projections, pro forma financial information, or management’s discussion and analysis.
In this section of the request for comment, the staff asked what types of attest engagements are currently performed under PCAOB attestation standards and for details on the circumstances under which they are performed and the type of attestation provided. It also asked whether any attest engagements are being performed pursuant to AT 301, AT 401, or AT 701 and for a description of the circumstances surrounding such engagements. The staff also wants to know if attest engagements are being performed that apply the interpretations in AT 9101.
The staff noted that some regulators require attestation reports to be issued under PCAOB attestation standards and asked for feedback on whether other organizations or entities require attestation reports issued under PCAOB attestation standards. It also asked whether there are circumstances under which an accounting firm chooses to voluntarily perform attest engagements under PCAOB attestation standards.
Potential updates. On the issue of whether the standards should be updated, the staff requested comment on whether specific improvements are needed and, if so, what those improvements are. It asked stakeholders to weigh in on whether the work of others, including that of specialists and internal auditors, is commonly used in performing attest engagements and for details on the nature of the work performed.
The staff would like respondents to consider whether other accountants are used in performing attest engagements and under what circumstances. It also asked whether there are circumstances in which accountants are engaged to perform agreed-upon procedures over an assertion rather than over subject matter.
The staff wants to know if engagement quality reviewers are used in attest engagements performed under PCAOB attestation standards as they are under AT No. 1 and AT No. 2. If so, the staff has asked for details on the circumstances in which they are used, and comments on any challenges or unintended consequences that might arise if PCAOB attestation standards required an engagement quality review.
Economic implications. Finally, the request for comment includes several questions aimed at determining the potential economic impact of updating the attestation standards. It requested any data or other information on current practices that would help to inform the staff’s analysis. It also asked commenters to consider possible unintended economic implications that could result from updating the attestation standards.