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PCAOB proposes seven new risk standards

October 22, 2008 — 9:22pm ET | By Jim Kim
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Risk Management
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Public Company Accounting Oversight Board (PCAOB)
fraud
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audit firms
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In the wake of the financial crisis, the government seems to be getting serious about risk control. We've long suggested that regulatory reform always follows major crises. The move by the PCAOB to propose seven new audit standards is certainly part and parcel of that effort. The Board has opened a 120-day comment period, ending February 18, 2009. The new standards will not be new to all audit firms. Some already conform to the proposed standards, but the board would now like them to be mandatory. In addition, the proposed standards dovetail, according to the PCAOB, with AS5, the new standard for Sarbanes-Oxley compliance.

Fraud considerations are factored in as well. The proposals make clear to auditors that risk assessment is something that touches on all aspects of the audit food chain. Until now, many assumed that risk management wasn't necessarily in scope from a Sarbox perspective. That seems to have changed.  

For more:
- here's the press release

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What to make of the PCAOB court decision?
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Comments

By Danny Lieberman | Posted 4:36am | October 31, 2008

I can understand the PCAOB, I just think that it is a mistake to try and legislate common sense - "make it clear to auditors tha trisk assessment is something touchs on all aspects of the audti food chain"

Having been involved in security and compliance audits for SOX in the past couple years - my guy feeling is that none of the companies involved in the financial crisis were actually, really SOX-compliant. Sure - their audtors signed off but
what about section 409 - real time reporting of problems?
Section 409 of SOX requires real-time disclosure of problems in “financial condition or operations… in terms that are easy to understand supported by trend and qualitative information of graphic presentations as appropriate”

A year ago there were numerous publicly-available indicators of problems. The current crisis may have started following the 9/11 attack on the US - when the Fed reduced interest rates and the the home-equity bubble started building up. In other words - the current firestorm was not born overnight.

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