Public Company Accounting Oversight Board; Order Approving Proposed Rule on Auditing Standard No. 6, Evaluating Consistency of Financial Statements, and Conforming Amendments, 54644-54646 [E8-22015]
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Federal Register / Vol. 73, No. 184 / Monday, September 22, 2008 / Notices
amount for the month to which such
deductions apply. LPE generally refers
to an annuitant’s last employment with
a non-railroad person, company, or
institution prior to retirement which
was performed whether at the same time
of, or after an annuitant stopped railroad
employment. The collection obtains
earnings information needed by the RRB
to determine if possible reductions in
annuities because of Last Pre-Retirement
Non-Railroad Employment Earnings
(LPE) are in order. The RRB utilizes
Form G–19L to obtain LPE earnings
information from annuitants.
Companion Form G–19L.1, which
serves as an instruction sheet and
contains the Paperwork Reduction/
Privacy Act Notice for the collection
accompanies each Form G–19L sent to
an annuitant. One response is requested
of each respondent. Completion is
required to retain a benefit. The RRB
proposes the addition of a subitem
requesting that an annuitant provide an
Employer’s Identification Number (EIN).
Non-burden impacting editorial and
reformatting changes are also proposed.
The estimated annual respondent
burden is as follows:
Annual
responses
Time (min)
G–19L ............................................................................................................................................................
300
15
75
Total ........................................................................................................................................................
300
..................
75
Form #(s)
Additional Information or Comments:
To request more information regarding
either of the information collections
listed above or to obtain copies of the
information collection justifications,
forms, and/or supporting material,
please call the RRB Clearance Officer at
(312) 751–3363 or send an e-mail
request to Charles.Mierzwa@RRB.GOV.
Comments regarding the information
collections should be addressed to
Ronald J. Hodapp, Railroad Retirement
Board, 844 North Rush Street, Chicago,
Illinois 60611–2092 or via an e-mail to
Ronald.Hodapp@RRB.GOV. Written
comments should be received within 60
days of this notice.
Charles Mierzwa,
Clearance Officer.
[FR Doc. E8–22076 Filed 9–19–08; 8:45 am]
BILLING CODE 7905–01–P
SECURITIES AND EXCHANGE
COMMISSION
sroberts on PROD1PC70 with NOTICES
Sunshine Act Meeting
Notice is hereby given, pursuant to
the provisions of the Government in the
Sunshine Act, Public Law 94–409, that
the Securities and Exchange
Commission will hold a Closed Meeting
on Tuesday, September 23, 2008 at 10
a.m.
Commissioners, Counsel to the
Commissioners, the Secretary to the
Commission, and recording secretaries
will attend the Closed Meeting. Certain
staff members who have an interest in
the matters also may be present.
The General Counsel of the
Commission, or his designee, has
certified that, in his opinion, one or
more of the exemptions set forth in 5
U.S.C. 552b(c)(3), (5), (7), 9(B) and (10)
and 17 CFR 200.402(a)(3), (5), (7), 9(ii)
and (10), permit consideration of the
scheduled matters at the Closed
Meeting.
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Commissioner Paredes, as duty
officer, voted to consider the items
listed for the Closed Meeting in closed
session, and determined that no earlier
notice was possible.
The subject matter of the Closed
Meeting scheduled for Tuesday,
September 23, 2008 will be:
Formal orders of investigation;
Institution and settlement of injunctive
actions;
Institution and settlement of administrative
proceedings of an enforcement nature; and
Other matters relating to enforcement
proceedings.
At times, changes in Commission
priorities require alterations in the
scheduling of meeting items.
For further information and to
ascertain what, if any, matters have been
added, deleted or postponed, please
contact:
The Office of the Secretary at (202)
551–5400.
Dated: September 17, 2008.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–22081 Filed 9–19–08; 8:45 am]
BILLING CODE 8010–01–P
Burden
(hrs)
U.S.C. 552b(c)(8) and (9) and 17 CFR
200.402(a)(8) and (9), permit
consideration of the scheduled matter at
the Closed Meeting.
Commissioner Paredes as duty officer,
voted to consider the item listed for the
closed meeting in closed session, and
determined that no earlier notice thereof
was possible.
The subject matter of the Closed
Meeting scheduled for Wednesday,
September 17, 2008, will be: Matters
related to the financial markets.
At times, changes in Commission
priorities require alterations in the
scheduling of meeting items. For further
information and to ascertain what, if
any, matters have been added, deleted
or postponed, please contact: The Office
of the Secretary at (202) 551–5400.
Dated: September 17, 2008.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–22133 Filed 9–22–08; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–58555; File No. PCAOB–
2008–01]
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meeting
Notice is hereby given, pursuant to
the provisions of the Government in the
Sunshine Act, Pub. L. 94–409, that the
Securities and Exchange Commission
will hold a Closed Meeting on
Wednesday, September 17, 2008, at 2
p.m.
Commissioners and certain staff
members who have an interest in the
matter will attend the Closed Meeting.
The General Counsel of the
Commission, or his designee, has
certified that, in his opinion, one or
more of the exemptions set forth in 5
PO 00000
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Public Company Accounting Oversight
Board; Order Approving Proposed
Rule on Auditing Standard No. 6,
Evaluating Consistency of Financial
Statements, and Conforming
Amendments
September 16, 2008.
I. Introduction
On February 1, 2008, the Public
Company Accounting Oversight Board
(the ‘‘Board’’ or the ‘‘PCAOB’’) filed
with the Securities and Exchange
Commission (the ‘‘Commission’’)
Proposed Auditing Standard No. 6,
Evaluating Consistency of Financial
Statements, (‘‘Auditing Standard No.
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Federal Register / Vol. 73, No. 184 / Monday, September 22, 2008 / Notices
6’’), and Conforming Amendments,
pursuant to Section 107 of the SarbanesOxley Act of 2002 (the ‘‘Act’’) and
Section 19(b) of the Securities Exchange
Act of 1934 (the ‘‘Exchange Act’’).
Auditing Standard No. 6 will
supersede the PCAOB’s interim auditing
standard on evaluating consistency, AU
section 420, Consistency of Application
of Generally Accepted Accounting
Principles. Auditing Standard No. 6 will
establish requirements and provide
direction for an auditor’s evaluation of
the consistency of financial statements,
including changes to previously issued
financial statements, and the effect of
that evaluation on the auditor’s report
on financial statements.
The Board’s proposed conforming
amendments affect several of the
Board’s interim auditing standards.
Those standards are: AU section 328,
Auditing Fair Value Measurements and
Disclosures, AU section 410, Adherence
to Generally Accepted Accounting
Principles, AU section 411, The
Meaning of Present Fairly in Conformity
With Generally Accepted Accounting
Principles, AU section 431, Adequacy of
Disclosure in Financial Statements, AU
section 508, Reports on Audited
Financial Statements, and AU section
561, Subsequent Discovery of Facts
Existing at the Date of the Auditor’s
Report. With the exception of the
proposed amendment to AU section
411, the Commission believes the
aforementioned amendments are
generally technical or conforming in
nature, such as updating references in
the interim standards to the proposed
new standard’s paragraph numbers and
definitions.
The proposed amendment to AU
section 411 will have the effect of
removing the hierarchy for accounting
principles generally accepted in the
United States (the ‘‘U.S. GAAP
hierarchy’’) from the PCAOB’s auditing
standards. The Financial Accounting
Standards Board (the ‘‘FASB’’) recently
issued Statement of Financial
Accounting Standards (‘‘SFAS’’) No.
162, The Hierarchy of Generally
Accepted Accounting Principles, which
will include the current U.S. GAAP
hierarchy going forward.1
Notice of the proposed standard and
the conforming amendments was
published in the Federal Register on
August 5, 2008.2 The Commission
received three comment letters on the
proposed rules and amendments. For
the reasons discussed below, the
1 The FASB issued SFAS No. 162 on May 9, 2008.
SFAS No. 162 becomes effective 60 days after the
date of this approval order.
2 Release No. 34–58259 (July 30, 2008).
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Commission is granting approval of the
proposed standard and conforming
amendments.
II. Description
The Act established the PCAOB to
oversee the audits of public companies
and related matters, in order to protect
the interests of investors and further the
public interest in preparation of
informative, accurate and independent
audit reports. Section 103(a) of the Act
directs the PCAOB to establish auditing
and related attestation standards,
quality control standards, and ethics
standards to be used by registered
public accounting firms in the
preparation and issuance of audit
reports as required by the Act or the
rules of the Commission.
On January 29, 2008, the Board
adopted Auditing Standard No. 6,
Evaluating Consistency of Financial
Statements, and amendments to the
Board’s interim auditing standards. The
Board proposed these changes to its
auditing standards in response to two
actions of the FASB.
First, in May 2005, the FASB issued
SFAS No. 154, Accounting Changes and
Error Corrections, which superseded
Accounting Principles Board (‘‘APB’’)
Opinion No. 20, Accounting Changes.
SFAS No. 154 establishes, unless
impracticable, retrospective application
as the required method for reporting a
change in accounting principle in the
absence of explicit transition
requirements specific to a newly
adopted accounting principle. SFAS No.
154 also redefines the term
‘‘restatement’’ to refer only to ‘‘the
process of revising previously issued
financial statements to reflect the
correction of an error in those financial
statements.’’ 3 Under SFAS No. 154,
therefore, the term ‘‘restatement’’ does
not refer to changes made to previously
issued financial statements to reflect a
change in accounting principle.
AU section 420, Consistency of
Application of Generally Accepted
Accounting Principles, the Board’s
interim standard on the auditor’s
responsibilities for evaluating the
consistency of the application of
generally accepted accounting
principles (‘‘GAAP’’), generally reflected
the provisions of APB Opinion No. 20,
which was superseded by SFAS No.
154. To better align the Board’s
standards with the new accounting
standard, the Board adopted a new
auditing standard on evaluating
consistency, which will supersede AU
section 420, and conforming
amendments to AU section 508, Reports
3 See
PO 00000
SFAS No. 154, paragraph 2j.
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54645
on Audited Financial Statements, of its
interim auditing standards.
Second, in 2005, the FASB issued an
exposure draft of a proposed Statement
of Financial Accounting Standards, The
Hierarchy of Generally Accepted
Accounting Principles. The FASB
proposed that this standard incorporate
the hierarchy found in the current
auditing standards into the accounting
standards. Historically, a description of
the U.S. GAAP hierarchy has resided
only in the auditing standards.
However, because the current U.S.
GAAP hierarchy identifies the sources
of accounting principles and the
framework for selecting principles to be
used in preparing financial statements,
the PCAOB and the FASB believed that
these requirements are more
appropriately located in the FASB’s
accounting standards. Accordingly, the
PCAOB adopted amendments to its
auditing standards to remove the U.S.
GAAP hierarchy.
In May 2008, the FASB issued in final
form, SFAS No. 162, The Hierarchy of
Generally Accepted Accounting
Principles. SFAS No. 162 will become
effective 60 days from the date of this
order approving Auditing Standard No.
6 and conforming amendments.
In addition to proposing Auditing
Standard No. 6 and the amendment to
AU section 411, the PCAOB proposed
amendments to other interim auditing
standards and related interpretations.
The Commission believes the
amendments to AU section 328,
Auditing Fair Value Measurements and
Disclosures, AU section 410, Adherence
to Generally Accepted Accounting
Principles, AU section 431, Adequacy of
Disclosure in Financial Statements, AU
section 508, Reports on Audited
Financial Statements, and AU section
561, Subsequent Discovery of Facts
Existing at the Date of the Auditor’s
Report, are technical or conforming in
nature.
As discussed further below, one of the
proposed amendments to AU section
431, Adequacy of Disclosure in
Financial Statements, proposes to delete
footnote 1 to paragraph 4 of AU section
431, which is an application of the
AICPA’s Code of Professional Conduct
regarding the disclosure of confidential
client information. In 2003, when the
Board adopted certain AICPA rules and
ASB standards as interim Board
standards, the Board did not adopt Rule
301. Consistent with that action, the
proposed amendments would eliminate
the reference to Rule 301 that is
included in paragraph 4 of AU section
Sec. 431.
The proposed Auditing Standard No.
6 and amendments to the Board’s
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Federal Register / Vol. 73, No. 184 / Monday, September 22, 2008 / Notices
interim standards are intended to
update and clarify the auditing
standards in light of SFAS No. 154 and
SFAS No. 162. In particular, these
updates and clarifications are intended
to enhance the clarity of auditor
reporting on accounting changes and
corrections of misstatements by
distinguishing between these events.
sroberts on PROD1PC70 with NOTICES
III. Discussion
The Commission received three
comment letters in response to its
request for comments on Auditing
Standard No. 6 and conforming
amendments. The comment letters came
from three registered public accounting
firms.4 All three commenters expressed
support for the Commission’s approval
of the proposed standard.
As noted above, the PCAOB’s
proposed amendment to AU section 431
deletes a reference to Rule 301 of the
AICPA’s Code of Professional
Conduct—a rule the PCAOB did not
adopt as part of its original interim
standards. Similar to comments made to
the PCAOB during its comment period,
one commenter believed concerns exist
that the Board’s action in removing a
reference to a rule the PCAOB did not
adopt might be construed as minimizing
the auditor’s responsibilities for
maintaining the confidentiality of client
information. The commenter requested
that the Commission encourage the
PCAOB to adopt a rule establishing the
auditor’s responsibility with respect to
maintaining the confidentiality of client
information.
In its adopting release, the PCAOB
discussed the concerns the comments
raised about client confidentiality and
noted its awareness of many auditors’
legal or professional obligations to
maintain the confidentiality of client
information, and made reference to the
confidentiality requirements included
in the provisions of the Uniform
Accountancy Act and the provisions of
the International Federation of
Accountants’ Code of Ethics for
Professional Accountants. The PCAOB
also noted that its decision to omit Rule
301 from its interim standards was
based on a determination that
incorporation of that rule was not
necessary to fulfill the Board’s mandate
under Section 103(a)(1) and (3) of the
Act at that time, and that it did not
reflect a decision that auditor
confidentiality requirements imposed
by other authorities were inappropriate.
Similarly, in amending AU section 431,
the PCAOB noted that it seeks neither
4 Deloitte and Touche LLP, Grant Thornton LLP,
and PricewaterhouseCoopers LLP.
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19:11 Sep 19, 2008
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to modify nor detract from existing
confidentiality requirements.
The Commission agrees with the
Board’s proposed action to remove from
its interim standards a reference to a
rule it did not adopt. However, the
Commission encourages the PCAOB to
develop and adopt a rule addressing the
auditor’s responsibility with respect to
maintaining the confidentiality of client
information.5
IV. Conclusion
On the basis of the foregoing, the
Commission finds that proposed
Auditing Standard No. 6 and the
Conforming Amendments are consistent
with the requirements of the Act and the
securities laws and are necessary and
appropriate in the public interest and
for the protection of investors.
It is therefore ordered, pursuant to
Section 107 of the Act and Section
19(b)(2) of the Exchange Act, that
proposed Auditing Standard No. 6,
Evaluating Consistency of Financial
Statements, and Conforming
Amendments (File No. PCAOB–2008–
01) be and hereby are approved.
By the Commission.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–22015 Filed 9–19–08; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–58536; File No. 4–566]
Program for Allocation of Regulatory
Responsibilities Pursuant to Rule 17d–
2; Order Approving and Declaring
Effective a Plan for the Allocation of
Regulatory Responsibilities Among the
American Stock Exchange LLC,
Boston Stock Exchange, Inc., CBOE
Stock Exchange, LLC, Chicago Stock
Exchange, Inc., Financial Industry
Regulatory Authority, Inc.,
International Securities Exchange,
LLC, The NASDAQ Stock Market LLC,
National Stock Exchange, Inc., New
York Stock Exchange, LLC, NYSE Arca
Inc., NYSE Regulation, Inc., and
Philadelphia Stock Exchange, Inc.
September 12, 2008.
On August 12, 2008, the American
Stock Exchange LLC (‘‘Amex’’), Boston
Stock Exchange, Inc. (‘‘BSE’’), CBOE
5 One commenter also noted that the adoption of
Auditing Standard No. 6 would cause existing
published PCAOB Staff Questions and Answers to
require updating. The Commission encourages the
PCAOB to ensure that its guidance is up to date
with its current standards and presumes the PCAOB
will update these Questions and Answers once
these amendments are approved.
PO 00000
Frm 00093
Fmt 4703
Sfmt 4703
Stock Exchange, LLC (‘‘CBOE’’), Chicago
Stock Exchange, Inc. (‘‘CHX’’), Financial
Industry Regulatory Authority, Inc.
(‘‘FINRA’’), International Securities
Exchange, LLC (‘‘ISE’’), The NASDAQ
Stock Market, LLC (‘‘NASDAQ’’),
National Stock Exchange, Inc. (‘‘NSX’’),
New York Stock Exchange LLC
(‘‘NYSE’’), NYSE Arca Inc. (‘‘NYSE
Arca’’), NYSE Regulation, Inc. (acting
under authority delegated to it by
NYSE) (‘‘NYSE Regulation’’), and
Philadelphia Stock Exchange, Inc.
(‘‘Phlx’’) (collectively, ‘‘Participating
Organizations’’ or ‘‘Parties’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 17(d) of the Securities
Exchange Act of 1934 (‘‘Act’’),1 and
Rule 17d–2 thereunder,2 a proposed
plan for the allocation of regulatory
responsibilities (‘‘Plan’’). The Plan was
published for comment on August 18,
2008.3 The Commission received no
comments on the Plan. This order
approves and declares effective the
Plan.
I. Introduction
Section 19(g)(1) of the Act,4 among
other things, requires every selfregulatory organization (‘‘SRO’’)
registered as either a national securities
exchange or national securities
association to examine for, and enforce
compliance by, its members and persons
associated with its members with the
Act, the rules and regulations
thereunder, and the SRO’s own rules,
unless the SRO is relieved of this
responsibility pursuant to Section
17(d) 5 or Section 19(g)(2) 6 of the Act.
Section 17(d)(1) of the Act 7 was
intended, in part, to eliminate
unnecessary multiple examinations and
regulatory duplication for those brokerdealers that maintain memberships in
more than one SRO (‘‘common
members’’).8 With respect to a common
member, Section 17(d)(1) authorizes the
Commission, by rule or order, to relieve
an SRO of the responsibility to receive
regulatory reports, to examine for and
enforce compliance with applicable
statutes, rules, and regulations, or to
1 15
U.S.C. 78q(d).
CFR 240.17d–2.
3 See Securities Exchange Act Release No. 58350
(August 13, 2008), 73 FR 48248 (File No. 4–566)
(‘‘Notice’’).
4 15 U.S.C. 78s(g)(1).
5 15 U.S.C. 78q(d).
6 15 U.S.C. 78s(g)(2).
7 15 U.S.C. 78q(d)(1).
8 See Securities Act Amendments of 1975, Report
of the Senate Committee on Banking, Housing, and
Urban Affairs to Accompany S. 249, S. Rep. No. 94–
75, 94th Cong., 1st Session 32 (1975).
2 17
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]]>Agencies
[Federal Register Volume 73, Number 184 (Monday, September 22, 2008)]
[Notices]
[Pages 54644-54646]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-22015]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-58555; File No. PCAOB-2008-01]
Public Company Accounting Oversight Board; Order Approving
Proposed Rule on Auditing Standard No. 6, Evaluating Consistency of
Financial Statements, and Conforming Amendments
September 16, 2008.
I. Introduction
On February 1, 2008, the Public Company Accounting Oversight Board
(the ``Board'' or the ``PCAOB'') filed with the Securities and Exchange
Commission (the ``Commission'') Proposed Auditing Standard No. 6,
Evaluating Consistency of Financial Statements, (``Auditing Standard
No.
[[Page 54645]]
6''), and Conforming Amendments, pursuant to Section 107 of the
Sarbanes-Oxley Act of 2002 (the ``Act'') and Section 19(b) of the
Securities Exchange Act of 1934 (the ``Exchange Act'').
Auditing Standard No. 6 will supersede the PCAOB's interim auditing
standard on evaluating consistency, AU section 420, Consistency of
Application of Generally Accepted Accounting Principles. Auditing
Standard No. 6 will establish requirements and provide direction for an
auditor's evaluation of the consistency of financial statements,
including changes to previously issued financial statements, and the
effect of that evaluation on the auditor's report on financial
statements.
The Board's proposed conforming amendments affect several of the
Board's interim auditing standards. Those standards are: AU section
328, Auditing Fair Value Measurements and Disclosures, AU section 410,
Adherence to Generally Accepted Accounting Principles, AU section 411,
The Meaning of Present Fairly in Conformity With Generally Accepted
Accounting Principles, AU section 431, Adequacy of Disclosure in
Financial Statements, AU section 508, Reports on Audited Financial
Statements, and AU section 561, Subsequent Discovery of Facts Existing
at the Date of the Auditor's Report. With the exception of the proposed
amendment to AU section 411, the Commission believes the aforementioned
amendments are generally technical or conforming in nature, such as
updating references in the interim standards to the proposed new
standard's paragraph numbers and definitions.
The proposed amendment to AU section 411 will have the effect of
removing the hierarchy for accounting principles generally accepted in
the United States (the ``U.S. GAAP hierarchy'') from the PCAOB's
auditing standards. The Financial Accounting Standards Board (the
``FASB'') recently issued Statement of Financial Accounting Standards
(``SFAS'') No. 162, The Hierarchy of Generally Accepted Accounting
Principles, which will include the current U.S. GAAP hierarchy going
forward.\1\
---------------------------------------------------------------------------
\1\ The FASB issued SFAS No. 162 on May 9, 2008. SFAS No. 162
becomes effective 60 days after the date of this approval order.
---------------------------------------------------------------------------
Notice of the proposed standard and the conforming amendments was
published in the Federal Register on August 5, 2008.\2\ The Commission
received three comment letters on the proposed rules and amendments.
For the reasons discussed below, the Commission is granting approval of
the proposed standard and conforming amendments.
---------------------------------------------------------------------------
\2\ Release No. 34-58259 (July 30, 2008).
---------------------------------------------------------------------------
II. Description
The Act established the PCAOB to oversee the audits of public
companies and related matters, in order to protect the interests of
investors and further the public interest in preparation of
informative, accurate and independent audit reports. Section 103(a) of
the Act directs the PCAOB to establish auditing and related attestation
standards, quality control standards, and ethics standards to be used
by registered public accounting firms in the preparation and issuance
of audit reports as required by the Act or the rules of the Commission.
On January 29, 2008, the Board adopted Auditing Standard No. 6,
Evaluating Consistency of Financial Statements, and amendments to the
Board's interim auditing standards. The Board proposed these changes to
its auditing standards in response to two actions of the FASB.
First, in May 2005, the FASB issued SFAS No. 154, Accounting
Changes and Error Corrections, which superseded Accounting Principles
Board (``APB'') Opinion No. 20, Accounting Changes. SFAS No. 154
establishes, unless impracticable, retrospective application as the
required method for reporting a change in accounting principle in the
absence of explicit transition requirements specific to a newly adopted
accounting principle. SFAS No. 154 also redefines the term
``restatement'' to refer only to ``the process of revising previously
issued financial statements to reflect the correction of an error in
those financial statements.'' \3\ Under SFAS No. 154, therefore, the
term ``restatement'' does not refer to changes made to previously
issued financial statements to reflect a change in accounting
principle.
---------------------------------------------------------------------------
\3\ See SFAS No. 154, paragraph 2j.
---------------------------------------------------------------------------
AU section 420, Consistency of Application of Generally Accepted
Accounting Principles, the Board's interim standard on the auditor's
responsibilities for evaluating the consistency of the application of
generally accepted accounting principles (``GAAP''), generally
reflected the provisions of APB Opinion No. 20, which was superseded by
SFAS No. 154. To better align the Board's standards with the new
accounting standard, the Board adopted a new auditing standard on
evaluating consistency, which will supersede AU section 420, and
conforming amendments to AU section 508, Reports on Audited Financial
Statements, of its interim auditing standards.
Second, in 2005, the FASB issued an exposure draft of a proposed
Statement of Financial Accounting Standards, The Hierarchy of Generally
Accepted Accounting Principles. The FASB proposed that this standard
incorporate the hierarchy found in the current auditing standards into
the accounting standards. Historically, a description of the U.S. GAAP
hierarchy has resided only in the auditing standards. However, because
the current U.S. GAAP hierarchy identifies the sources of accounting
principles and the framework for selecting principles to be used in
preparing financial statements, the PCAOB and the FASB believed that
these requirements are more appropriately located in the FASB's
accounting standards. Accordingly, the PCAOB adopted amendments to its
auditing standards to remove the U.S. GAAP hierarchy.
In May 2008, the FASB issued in final form, SFAS No. 162, The
Hierarchy of Generally Accepted Accounting Principles. SFAS No. 162
will become effective 60 days from the date of this order approving
Auditing Standard No. 6 and conforming amendments.
In addition to proposing Auditing Standard No. 6 and the amendment
to AU section 411, the PCAOB proposed amendments to other interim
auditing standards and related interpretations. The Commission believes
the amendments to AU section 328, Auditing Fair Value Measurements and
Disclosures, AU section 410, Adherence to Generally Accepted Accounting
Principles, AU section 431, Adequacy of Disclosure in Financial
Statements, AU section 508, Reports on Audited Financial Statements,
and AU section 561, Subsequent Discovery of Facts Existing at the Date
of the Auditor's Report, are technical or conforming in nature.
As discussed further below, one of the proposed amendments to AU
section 431, Adequacy of Disclosure in Financial Statements, proposes
to delete footnote 1 to paragraph 4 of AU section 431, which is an
application of the AICPA's Code of Professional Conduct regarding the
disclosure of confidential client information. In 2003, when the Board
adopted certain AICPA rules and ASB standards as interim Board
standards, the Board did not adopt Rule 301. Consistent with that
action, the proposed amendments would eliminate the reference to Rule
301 that is included in paragraph 4 of AU section Sec. 431.
The proposed Auditing Standard No. 6 and amendments to the Board's
[[Page 54646]]
interim standards are intended to update and clarify the auditing
standards in light of SFAS No. 154 and SFAS No. 162. In particular,
these updates and clarifications are intended to enhance the clarity of
auditor reporting on accounting changes and corrections of
misstatements by distinguishing between these events.
III. Discussion
The Commission received three comment letters in response to its
request for comments on Auditing Standard No. 6 and conforming
amendments. The comment letters came from three registered public
accounting firms.\4\ All three commenters expressed support for the
Commission's approval of the proposed standard.
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\4\ Deloitte and Touche LLP, Grant Thornton LLP, and
PricewaterhouseCoopers LLP.
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As noted above, the PCAOB's proposed amendment to AU section 431
deletes a reference to Rule 301 of the AICPA's Code of Professional
Conduct--a rule the PCAOB did not adopt as part of its original interim
standards. Similar to comments made to the PCAOB during its comment
period, one commenter believed concerns exist that the Board's action
in removing a reference to a rule the PCAOB did not adopt might be
construed as minimizing the auditor's responsibilities for maintaining
the confidentiality of client information. The commenter requested that
the Commission encourage the PCAOB to adopt a rule establishing the
auditor's responsibility with respect to maintaining the
confidentiality of client information.
In its adopting release, the PCAOB discussed the concerns the
comments raised about client confidentiality and noted its awareness of
many auditors' legal or professional obligations to maintain the
confidentiality of client information, and made reference to the
confidentiality requirements included in the provisions of the Uniform
Accountancy Act and the provisions of the International Federation of
Accountants' Code of Ethics for Professional Accountants. The PCAOB
also noted that its decision to omit Rule 301 from its interim
standards was based on a determination that incorporation of that rule
was not necessary to fulfill the Board's mandate under Section
103(a)(1) and (3) of the Act at that time, and that it did not reflect
a decision that auditor confidentiality requirements imposed by other
authorities were inappropriate. Similarly, in amending AU section 431,
the PCAOB noted that it seeks neither to modify nor detract from
existing confidentiality requirements.
The Commission agrees with the Board's proposed action to remove
from its interim standards a reference to a rule it did not adopt.
However, the Commission encourages the PCAOB to develop and adopt a
rule addressing the auditor's responsibility with respect to
maintaining the confidentiality of client information.\5\
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\5\ One commenter also noted that the adoption of Auditing
Standard No. 6 would cause existing published PCAOB Staff Questions
and Answers to require updating. The Commission encourages the PCAOB
to ensure that its guidance is up to date with its current standards
and presumes the PCAOB will update these Questions and Answers once
these amendments are approved.
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IV. Conclusion
On the basis of the foregoing, the Commission finds that proposed
Auditing Standard No. 6 and the Conforming Amendments are consistent
with the requirements of the Act and the securities laws and are
necessary and appropriate in the public interest and for the protection
of investors.
It is therefore ordered, pursuant to Section 107 of the Act and
Section 19(b)(2) of the Exchange Act, that proposed Auditing Standard
No. 6, Evaluating Consistency of Financial Statements, and Conforming
Amendments (File No. PCAOB-2008-01) be and hereby are approved.
By the Commission.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-22015 Filed 9-19-08; 8:45 am]
BILLING CODE 8010-01-P
