PCAOB staff guidance on Rule 3526(b)
FINANCIAL REPORTING INSIGHTS |
Public Company Accounting Oversight Board (PCAOB) Rule 3526 requires auditors to provide audit committees with sufficient information to understand how a relationship between the auditor and the audit client might affect the auditor’s independence. The PCAOB recently released staff guidance, Rule 3526(b) Communications with Audit Committees Concerning Independence, regarding how auditors are to comply with certain provisions of Rule 3526.
In addition to providing a summary of Rule 3526(b) and background information, this guidance addresses the application of Rule 3526(b) in circumstances where one or more auditor independence rules violations had occurred, and the firm and the audit committee of the audit client had each determined that the engagement could continue. The guidance clarifies that, in circumstances where the auditor and the audit committee determine that the audit engagement can continue, notwithstanding one or more violations, the auditor should not state in its required annual affirmation that the auditor is independent, but instead should indicate that the auditor would be independent except for the violation or violations that it has identified and discussed with the audit committee. In addition, the guidance provides other specific directions to registered public accounting firms on how to comply with their Rule 3526(b) obligations in such circumstances.