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Press Release

NYSSCPA Backs Expanded Proposed ASU on Related Parties

Lois Whitehead, Public Relations Manager
Published Date:
Jun 8, 2012
NEW YORK, NY, June 8, 2012 – The New York State Society of Certified Public Accountants (NYSSCPA) supports a proposed auditing standard update (ASU) put forth by the Public Company Accounting Oversight Board (PCAOB) that would improve an auditor’s evaluation of a public company in regards to its relationships and transactions with related parties.
In a comment letter sent to the PCAOB in response to PCAOB Release No. 2012-001, the NYSSCPA note that it agrees with the decision to adopt a “framework neutral” approach and to allow the relevant financial reporting framework to provide the definition of a related party. The NYSSCPA’s Auditing Standards, International Accounting and Auditing and SEC Practice committees deliberated the release and prepared the comment letter.
“The absence of those guidelines has caused a lot of problems with different types of financial arrangements,” said one of the comment letter’s principal drafters and NYSSPCA Auditing Standards Committee member J. Roger Donohue, CPA.
The PCAOB is also proposing amendments to enhance the auditor’s identification and evaluation of a company’s significant unusual transactions. These amendments are being proposed in order to improve the auditor’s understanding of a company’s financial relationship with its executive officers according to a release issued by the PCAOB.
The NYSSCPA recognizes the importance of emphasizing in auditing standards the identification of significant unusual transactions, which allow the auditor to identify and assess the risks with which a material misstatement and the appropriate accounting recognition and disclosure issues can be dealt.
Despite the improvements in these auditing standards, the NYSSCPA is concerned that the standard implies the auditor will always be able to identify all such transactions, which would be technically impossible.
The NYSSCPA suggested the establishment of additional guidance in the ASU explaining that in certain situations, controls over related party relationships and transaction may be lacking or may not exist at all.
About the NYSSCPA
Representing more than 28,000 CPAs, the NYSSCPA was the first state accounting organization in the nation. Incorporated in 1897, the Society is a not-for-profit organization that seeks to establish and maintain high standards of integrity, honor, and character among certified public accountants.
The New York State Society of CPAs is located at 3 Park Avenue in New York City. To learn more about the Society, call 800-633-6320 or visit the Society’s website at www.nysscpa.org.