On Feb. 27, 2025, PCAOB posted a new knowledge check to help auditors gauge their understanding of important aspects of AS 2310, which replaced the interim standard.
PCAOB proposed new standard for auditor use of confirmation, to finalize interim rule.
Note, PCAOB held its open meeting re confirmation process revisions, see #156272.
In addition, PCAOB chair Erica Williams issued remarks in support for the consultation.
Rationale for New Standard
In brief, the confirmation request by an auditor is made directly to a confirming party (e.g., a financial institution), to evaluate information and address insufficient response.
The current process standard was first adopted in 2003 and has not been updated.
Given tech / digital advances, it is in investors' best interest to issue a new standard.
Goal is to modernize, strengthen, and align the standards to PCAOB risk assessments.
Confirmation Process Proposal
Replace standard re an auditor’s use of confirmation, AS 2310, The confirmation process, with a new proposed standard, AS 2310, The auditor’s use of confirmation.
Addresses risk of material misstatement, confirming certain accounts and transaction terms, designing requests, process control, response and exception evaluation, audit.
Account for audit innovation, electronic or intermediary methods, and future channels.
Integrate AS 2310 with AS 1105, Board risk assessment standards and evidence.
Endorse confirmation in scenarios re cash held by third parties or accounts receivable.
Make use of a negative confirmation request when combined with other procedures.
Re effectiveness, the Board will consider effect for audit years in the year after SEC approval, or for audits in fiscal years two years after SEC approval, if approved in 4Q.
Consultation
Public comment on the proposed new standard are due by Feb. 20, 2023.
Sep. 28, 2023 PCAOB Board Approved Standard
On Sep. 28, 2023, PCAOB approved revised standard for auditor use of confirmation.
Subject to SEC approval, standard takes effect for audits for FYs ending Jun. 15, 2025.
Included a new requirement regarding confirming cash and cash equivalents held by third parties or obtaining relevant and reliable audit evidence by accessing information.
Carried forward the existing requirement regarding confirming accounts receivable, while also addressing situations where it is not feasible for the auditor to confirm.
Negative confirmation requests alone does not provide sufficient appropriate evidence.
Emphasized auditor’s responsibility to maintain control over the confirmation process and provides that the auditor is responsible for selecting the items to be confirmed.
Identified situations in which alternative procedures should be performed by auditor.
On Oct. 17, 2023, SEC published notice of PCAOB filing of proposed new standard.
Subject to SEC approval, the new standard adopted by the PCAOB board for auditor's use of confirmation shall take effect for audits for fiscal years ending Jun. 15, 2025.
PCAOB filed proposal Oct. 4; SEC notice Oct. 5; published in federal register Oct. 17.
Comments on the proposed amendments must be submitted by Nov. 7, 2023.
Dec. 1, 2023 SEC Approval
On Dec. 1, 2023, SEC issued order granting approval of new standard, amendments.
SEC found to be consistent with the requirements of SOX and the securities laws and necessary or appropriate in the public interest or for the protection of investors.
Separately, the SEC found that the application of the amendments to the audits of Emerging growth companies (EGCs) is necessary or appropriate in the public interest.
Commission received 3 comment letters generally in support of proposed amendments
The adopting release addressed suggestions for expanded explanations and examples.
PCAOB Chair Erica Williams issued statement following the SEC's approval of standard.
Amendments effective for audits of financials for FY ending on/after Jun. 15, 2025.
Dec. 6, 2023 SEC Fed Reg Approval
On Dec. 6, 2023, SEC published approval of PCAOB standard in the federal register.
Dec. 2024 PCAOB Confirmation
On Dec. 4, 2024, PCAOB posted a staff presentation video on the replacement of AS 2310, The Confirmation Process, with AS 2310, The Auditor’s Use of Confirmation.
Changes strengthen and modernize the requirements for the confirmation process.
Improved audit quality when confirmation is used by auditor, changed communication and business practice, such as e-communications and third-party intermediaries.
New standard and related amendments effective for FY ending on/after Jun. 15, 2025.
Feb. 2025 PCAOB AS 2310 Knowledge Check
On Feb. 27, 2025, PCAOB posted a new knowledge check to help auditors gauge their understanding of important aspects of AS 2310, which replaced the interim standard.
