Last week the SEC approved new PCAOB rules regarding:
- Company relationships and transactions with related parties,
- “Significant unusual transactions”, and
- Company relationships and transactions with its executive officers.
These three areas were selected for enhanced auditor requirements because of the frequency with which they generate material misstatements in a company’s financial statements or outright financial fraud.
New Auditing Standard No. 18 will take effect for audits of fiscal years beginning on or after December 15, 2014.
The new rules are designed to strengthen auditor requirements for identifying, assessing and responding to the risks of material misstatements by requiring the auditor to, among other things:
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