Corporate & Securities Law

By Jim Hamilton

PCAOB Staff Interprets New Engagement Quality Review Standard

According to a PCAOB staff Q&A, the new standard on engagement quality review, AS No. 7, does not require the documentation of all of the interactions between the engagement quality reviewer and the engagement team, including all of the interactions before a matter is identified as a significant engagement deficiency. The example in the adopting release illustrates how the documentation requirements of AS No. 7 should be applied once a reviewer concludes that a significant engagement deficiency exists.

The example indicates that engagement quality review documentation should contain sufficient information to enable an experienced auditor, having no previous connection with the engagement, to understand the significant deficiency identified, how the reviewer communicated the deficiency to the engagement team, why such matter was important, and how the reviewer evaluated the engagement team's response.

AS No. 7 requires an engagement quality review and concurring approval of issuance of each audit engagement and for each engagement to review financial information conducted pursuant to PCAOB standards.

In its order approving AS No. 7, the SEC encouraged the PCAOB to provide
further implementation guidance on the documentation requirements of the standard in light of comments the SEC received during its comment period.

Full post as published by Jim Hamilton's World of Securities Regulation on February 26, 2010 (boomark / email).