PCAOB Adopts Auditing Standard 16

PCAOB Adopts Auditing Standard 16

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Audited financial statements included in the Form S-1 for an IPO must be audited in accordance with PCAOB standards and accompanied by an audit report. On August 15, 2012, the PCAOB adopted Auditing Standard 16 (AS 16), which prescribes the communications that an independent registered public accounting firm must make to the audit committee of its client prior to issuing an audit report. Subject to SEC approval, Auditing Standard 16 will be effective for audits for periods ending after December 15, 2012. Read PCAOB's release adopting the new standard.

The matters auditors must discuss with the audit committee fall into several general areas, including appointment and retention of the auditor; obtaining information and communicating the audit strategy; results of the audit; form and documentation of communications; and timing. While the communications may be written or oral, the auditor is required to maintain documentation sufficient to establish that the communications were made. All communications must be made prior to issuance of the audit report. In general, the new standard codifies communications practices already followed by many auditors and audit committees, and does not create new substantive audit procedures.

AS 16 is the first PCAOB standard adopted since the enactment of the JOBS Act. By its terms, the standard will apply to emerging growth companies, subject to separate SEC approval under the standards prescribed by the JOBS Act.

You can read more about AS 16 here.