SEC Approval Process Mandated by Sarbanes-Oxley
In creating the PCAOB, the Sarbanes-Oxley Act set forth a requirement that all final standards approved by the PCAOB board would be subject to approval by the SEC, after a separate notice and comment period engaged in at the SEC (in addition to the PCAOB's own notice and comment period on their own rule proposals).
As noted in the PCAOB's announcement of the SEC's approval of AS7:
The standard is effective for engagement quality reviews of audits and interim reviews for fiscal years that began on or after Dec. 15, 2009.
Accordingly, for interim reviews of public companies that file financial reports on a calendar-year basis, the EQR standard is applicable beginning with the quarter ending March 31, 2010. The new EQR standard was adopted by the PCAOB on July 28, 2009.
Implementation Guidance Coming in the 'Near Future'
The PCAOB's announcement added:
The SEC, in its order approving the EQR standard, encouraged the PCAOB to issue guidance on the standard’s documentation requirements. The PCAOB plans to publish Staff Questions and Answers on implementation of the standard in the near future.
SEC Response To Other Comments
According to the SEC Order Approving AS 7, nine comment letters were received by the SEC during its own notice and comment period on AS7 (seven from audit firms, one from the Center for Audit Quality (affiliated with the AICPA), and one from the U.S. Chamber of Commerce's Center for Capital Market Competitiveness). Concerns raised in those comment letters, as noted in the SEC Order, related to perceived inconsistencies between language in the PCAOB's adopting release accompanying AS7 vs. the language in the standard itself, questions about the status of language in the adopting release (which is not subject to public comment), and questions about the PCAOB's standard-setting process.
Other than the request of the SEC to the PCAOB to provide implementation guidance on the documentation requirements in AS7 (as noted further above), the SEC did not believe any changes to AS7 were required based on their review of comments received.
Additional information can be found in this Crowe Horwath Auditing Update: New PCAOB Auditing Standard To Be Implemented Soon.
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