What's Changing in the PCAOB?
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Jen: This is the PKF Texas Entrepreneur’s Playbook. I’m Jen Lemanski, and I’m back again with Miriam Rouziek, an audit manager and a member of the PKF Texas SEC team. Miriam welcome back to The Playbook.
Miriam: Thanks, Jen, I’m glad to be back.
Jen: So, last time we talked about the SEC; this time I think we want to talk a little bit about the PCAOB and how some of their inspection trends are going to be changing. What do we need to know?
Miriam: Right. The PCAOB is more focused on your audit firm, so they’re not going to be coming and asking you questions. They’ll be coming to us and your other audit firms, asking us questions about your financial statements, how we audited them and where we focused our audit testing on. So, similar to the SEC, the PCAOB is going to be focused on the new revenue recognition guidance, as well as the upcoming lease guidance standards, so we’re going to be looking more in depth on those as part of our audit.
Jen: Perfect. Now, is there anything else public companies need to know about what the PCAOB is going to be looking for?
Miriam: The PCAOB is going to be looking into our audit procedures to see how we changed our audit procedures and whether or not they were sufficient in addressing the new revenue recognition guidance and looking forward to the new lease standard guidance. So, we may have more questions for our clients about what’s going to happen with their financial statements, how we’re going to get comfortable with those issues.
Jen: Are they going to focus on any specific areas beyond the revenue recognition and lease accounting?
Miriam: The PCAOB is focused on audit quality. They’re going to be looking at all areas of our audits, but they’re going to be focusing on areas that have significant accounting judgement. So, this is going to be things like significant estimates that the company comes up with for their financial statements. This may include the estimates regarding your leases, estimates regarding revenue that’s estimated at year end for contracts that cover both December and January, for example, or that are in process at the end of the year that revenue may be recognized at the beginning of next year. They’re also going to be looking at things like impairment of goodwill and other intangible assets; basically, anything that the company is going to have significant accounting judgement.
Jen: Interesting, perfect. Well, it sounds like we’ll be working with our clients through the audit process to make sure that we meet all these requirements.
Miriam: Sure, absolutely. And just remember the PCAOB isn’t going to call you – they’re going to call us.
Jen: All right, perfect. For more about this topic, visit PKFTexas.com/SECDesk. This has been another Thought Leader production brought to you by PKF Texas The Entrepreneur’s Playbook. Tune in next week for another chapter.