PCAOB Auditing Standard on Engagement Quality Review

The Public Company Accounting Oversight Board announced that the U.S. Securities and Exchange Commission approved Auditing Standard No. 7, Engagement Quality Review (EQR). The standard is effective for engagement quality reviews of audits and interim reviews for fiscal years that began on or after Dec. 15, 2009.

Accordingly, for interim reviews of public companies that file financial reports on a calendar-year basis, the EQR standard is applicable beginning with the quarter ending March 31, 2010.

“The new standard is an important milestone in fulfilling the Board’s mandate,” said PCAOB Acting Chairman Daniel L. Goelzer. “This standard should improve the reliability of audited financial statements by increasing the likelihood that reviewers will identify significant engagement deficiencies before audit reports are issued to the investing public.”

Martin F. Baumann, Chief Auditor and Director of Professional Standards, said, “A well-performed EQR can serve as an important safeguard against erroneous or insufficiently supported audit opinions and, accordingly, can contribute to audit quality.”

The SEC, in its order approving the EQR standard, encouraged the PCAOB to issue guidance on the standard’s documentation requirements. The PCAOB plans to publish Staff Questions and Answers on implementation of the standard in the near future.