Accounting oversight board issues alert to assist auditors with new standard

The Public Company Accounting Oversight Board (PCAOB) published a practice alert last week to assist auditors in applying PCAOB standards when auditing companies’ implementation of the Financial Accounting Standards Board’s new revenue accounting standard.

“We are publishing this alert to help auditors apply relevant PCAOB requirements in upcoming interim reviews and year-end audits,” Martin Baumann, PCAOB chief auditor and director of professional standards at PCAOB, said.

The oversight board has heard from a number of interested parties, including the PCAOB Standing Advisory Group, that guidance on auditing revenue would be helpful, Baumann said.

“Staff Audit Practice Alert No. 15: Matters Related to Auditing Revenue from Contracts with Customers,” highlights PCAOB requirements and other considerations for audits of a company’s implementation of the new revenue accounting standard, including transition disclosures and transition adjustments, internal control over financial reporting, fraud risks, revenue recognition, and disclosures.

The Financial Accounting Standards Board adopted a new accounting standard, “Revenue from Contracts with Customers,” in May 2014. As companies implement the new revenue standard, they may need to change their systems, processes, and controls, or to develop new ones. Done poorly, such changes could pose heightened risks of material misstatement, including fraud risks.

The PCAOB said it will continue to monitor the auditing of revenue as part of its ongoing oversight activities.