15 May 2012

FEE commented on the PCAOB proposed auditing standard on related parties

FEE's general comments on the issues raised in the PCAOB proposed standard that are relevant from a European or international perspective can be summarised as follows:

1. In general, FEE believes that alignment in auditing standards worldwide, to the maximum degree possible, is beneficial for capital market participants with cross-border interests and global activities. The new proposed standard on related parties introduces a closer alignment with the equivalent ISA issued by the IAASB. However, differences remain as displayed in the comparative analysis. Given that related parties often have cross-border elements in large companies, FEE believes that differences in audit standards regarding the audit of related parties should be kept to a minimum with differences only arising from specific national requirements.
2. It would be appropriate explicitly to include fraud risk in the objective of an audit standard on related parties.
3. Throughout the standard, it should be highlighted that the responsibility to identify related parties is the one of the company in line with the objective of the standard, and not of the auditor.
4. A true two-way communication between the auditor and the audit committee regarding related parties should be further highlighted. This additional focus on two-way communication in a PCAOB audit standard would give due consideration to a global solution on the matter, in light of the current European debate on strengthening the role of audit committees and the communication between the auditor and the audit committee.

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