tateattorney.com – PCAOB adopts new standard to obtain affirmative confirmations of cash, cash equivalents, and accounts receivable (if approved by the SEC) (David Tate, Esq.)

This topic might seem esoteric, and I am not going to spend much time on it, but in the accounting and auditing world, and to help fight fraud, the PCAOB (Public Company Accounting Oversight Board) has adopted a new standard which in summary states that obtaining a negative confirmation alone does not provide sufficient appropriate audit evidence to support cash, cash equivalents, and accounts receivable. The new standard will first need to be approved by the SEC, and the standard is proposed to not be effective until audits of financial statements for fiscal years ending on or after June 15, 2025. The PCAOB is proposing that if the new rule is approved it will become insufficient to merely send an inquiry to a third party about the correctness of a dollar amount or balance, and to accept that the dollar amount or balance is correct if the third party does not affirmatively respond or does not affirmatively respond and state otherwise.

You might be aware that the PCAOB has become more active of late on such topics as auditor independence, auditor auditing and compliance processes including auditing firm internal processes, and detecting fraud. The PCAOB has also proposed that in some situations an expanded category or group of auditors can be held responsible for failures to comply with auditing pronouncements and processes, and the PCAOB also has proposed a new standard that would require auditors to more specifically and directly audit for fraud (and this new standard, if finalized and then approved by the SEC, would be a significant auditing change that has been discussed and debated for decades).

Below I have provided a snapshot from part of the PCAOB release pertaining to the new proposed standard that would require certain affirmative confirmations, if adopted by the SEC.

* * * *

Thank you for viewing this discussion. Please do pass this blog and blog post and information to other people who would be interested as it is only through collaboration and sharing that great things and success are more quickly achieved. If you are interested in discussing anything that I have said in the discussion above or in either of my two blogs (see blog addresses below), or if you simply want to reach out or are seeking assistance, it is best to reach me by email at dave@tateattorney.com.

David Tate, Esq. (and inactive CPA)

• Business litigation and disputes – business, breach of contract/commercial, co-owners, shareholders, investors, founders, workplace and employment, environmental, D&O, governance, boards and committees.
• Trust, estate and probate court litigation and disputes – trust, estate, probate, elder and dependent abuse, conservatorship, POA, real property, mental health and care, mental capacity, undue influence, conflicts of interest, and contentious administrations.
• Governance, boards, audit and governance committees, investigations, auditing, ESG, etc.
• Mediator and facilitating dispute resolution (evaluative and facilitative):
  • Trust, estate, probate, conservatorship, elder and dependent abuse, etc.
  • Business, breach of contract/commercial, owner, shareholder, investor, etc.
  • D&O, board, audit and governance committee, accountant and CPA related.
  • Other: workplace and employment, environmental, trade secret.

Remember, every case and situation is different. It is important to obtain and evaluate all of the evidence that is available, and to apply that evidence to the applicable standards and laws. You do need to consult with an attorney and other professionals about your particular situation. This post is not a solicitation for legal or other services inside of or outside of California, and, of course, this post only is a summary of information that changes from time to time, and does not apply to any particular situation or to your specific situation. So . . . you cannot rely on this post for your situation or as legal or other professional advice or representation, or as or for my opinions and views on the subject matter.

Also note – sometimes I include links to or comments about materials from other organizations or people – if I do so, it is because I believe that the materials are worthwhile reading or viewing; however, that does not mean that I do not or that I might not have a different view about some or even all of the subject matter or materials, or that I necessarily agree with, or agree with everything about or relating to, that organization or person, or those materials or the subject matter.

Please also subscribe to this blog and my other blog (see below), and connect with me on LinkedIn and Twitter.

My two blogs are:

http://tateattorney.com – business, D&O, audit committee, governance, compliance, etc. – previously at http://auditcommitteeupdate.com

Trust, estate, conservatorship, elder and elder abuse, etc. litigation and contentious administrations http://californiaestatetrust.com

David Tate, Esq. (and inactive California CPA) – practicing only as an attorney in California.