In the first sentence, the reference to ``AU section 504,
Association With Financial Statements'' is replaced with ``AS 3320,
Association with Financial Statements.''
     In the second sentence:
     The reference to ``AU section 504.04'' is replaced with
``AS 3320.04.''
     The reference to ``AU section 722, Interim Financial
Information'' is replaced with ``AS 4105, Reviews of Interim Financial
Information).''
     The reference to ``AU section 504.05'' is replaced with
``AS 3320.05.''
    i. In footnote 16 to paragraph .36, the reference to ``AU section
530, Dating of the Independent Auditor's Report, paragraphs .06 and
.07'' is replaced with ``paragraphs .06 and .07 of AS 3110, Dating of
the Independent Auditor's Report.''
    j. In footnote 18 to paragraph .40, the bracketed reference to ``AU
section 508'' is replaced with ``AS 3101.''
AT sec. 301, ``Financial Forecasts and Projections''
    AT sec. 301, ``Financial Forecasts and Projections,'' is amended as
follows:
    a. The following note is added at the end of paragraph .01:
    Note: In connection with an engagement performed in accordance with
this attestation standard, whenever the practitioner is required to
make reference in a report to attestation standards established by the
American Institute of Certified Public Accountants, the practitioner
must instead refer to ``the standards of the Public Company Accounting
Oversight Board (United States).'' A practitioner must also include the
city and state (or city and country, in the case of non-U.S.
practitioners) from which the practitioner's report has been issued.
    b. In footnote 4 to paragraph .08e, the reference to ``AU section
623'' is replaced with ``AS 3305.''
    c. In footnote 12 to paragraph .23, the parenthetic reference to
``AU section 9504.19-.22'' is replaced with ``paragraphs .19-.22 of AI
25, Association with Financial Statements: Auditing Interpretations of
AS 3320.''
    d. In paragraph .24:
     In footnote 13, the reference to ``AU section 504,
Association With Financial Statements'' is replaced with ``AS 3320,
Association with Financial Statements.''
     In footnote 14, the reference to ``AU section 552'' is
replaced with ``AS 3315.''
    e. In paragraph .48:
     In footnote 23, the reference to ``AU section 504'' is
replaced with ``AS 3320.''
     In footnote 24, the reference to ``AU section 552'' is
replaced with ``AS 3315.''
    f. In footnote 26 to paragraph .52, the reference to ``AU section
634'' is replaced with ``AS 6101.''
    g. In paragraph .60:
     In footnote 29:
     In the first sentence, the reference to ``AU section 550''
is replaced with ``AS 2710.''
     In the second sentence:
     The reference to ``AU section 550'' is replaced with ``AS
2710.''
     The bracketed reference to ``AU section 711, Filings Under
Federal Securities Statutes'' is replaced with ``AS 4101,
Responsibilities Regarding Filings Under Federal Securities Statutes.''
     In the last sentence, the reference to ``AU section 550''
is replaced with ``AS 2710.''
    h. In the first sentence of footnote 5 to item 11d of paragraph
.70, Appendix C, the reference to ``AU section 722, Interim Financial
Information, paragraphs .13 through .19'' is replaced with ``paragraphs
.13 through .19 of AS 4105, Reviews of Interim Financial Information.''
AT sec. 401, ``Reporting on Pro Forma Financial Information''
    AT sec. 401, ``Reporting on Pro Forma Financial Information,'' is
amended as follows:
    a. In footnote 1 to paragraph .01:
     In the first sentence, the reference to ``AU section 634,
Letters for Underwriters and Certain Other Requesting Parties,
paragraphs .03 through .05'' is replaced with ``Paragraphs .03 through
.05 of AS 6101, Letters for Underwriters and Certain Other Requesting
Parties.''
     In the last sentence, the reference to ``AU section
634.03'' is replaced with ``AS 6101.03.''
    b. The following note is added at the end of paragraph .01:
    Note: In connection with an engagement performed in accordance with
this attestation standard, whenever the practitioner is required to
make reference in a report to attestation standards established by the
American Institute of Certified Public Accountants, the practitioner
must instead refer to ``the standards of the Public Company Accounting
Oversight Board (United States).'' A practitioner must also include the
city and state (or city and country, in the case of non-U.S.
practitioners) from which the practitioner's report has been issued.
    c. In paragraph .02, the reference to ``AU section 550, Other
Information in Documents Containing Audited Financial Statements, and
AU section 711, Filings Under Federal Securities Statutes'' is replaced
with ``AS 2710, Other Information in Documents Containing Audited
Financial Statements, and AS 4101, Responsibilities Regarding Filings
Under Federal Securities Statutes.''
    d. In footnote 2 to paragraph .03:
     In the second sentence, the reference to ``AU section 560,
Subsequent Events, paragraph .05'' is replaced with ``paragraph .05 of
AS 2801, Subsequent Events.''
     In the last sentence, the reference to ``AU section 508,
Reports on Audited Financial Statements, paragraph .28'' is replaced
with ``paragraph .28 of AS 3101, Reports on Audited Financial
Statements.''
    e. In the second sentence of footnote 5 to paragraph .07b, the
reference to ``AU section 722, Interim Financial

Information'' is replaced with ``AS 4105, Reviews of Interim Financial
Information.''
AT sec. 601, ``Compliance Attestation''
    AT sec. 601, ``Compliance Attestation,'' as amended, is amended as
follows:
    a. The following note is added at the end of paragraph .01:
    Note: In connection with an engagement performed in accordance with
this attestation standard, whenever the practitioner is required to
make reference in a report to attestation standards established by the
American Institute of Certified Public Accountants, the practitioner
must instead refer to ``the standards of the Public Company Accounting
Oversight Board (United States).'' A practitioner must also include the
city and state (or city and country, in the case of non-U.S.
practitioners) from which the practitioner's report has been issued.
    b. In paragraph .02:
     In item b, the reference to ``AU section 623, Special
Reports, paragraphs .19 through .21'' is replaced with ``paragraphs .19
through .21 of AS 3305, Special Reports.''
     In item c, the reference to ``AU section 801, Compliance
Auditing Considerations in Audits of Governmental Entities and
Recipients of Governmental Financial Assistance'' is replaced with ``AS
6110, Compliance Auditing Considerations in Audits of Recipients of
Governmental Financial Assistance.''
     In item d, the reference to ``AU section 634'' is replaced
with ``AS 6101.''
    c. In footnote 5 to paragraph .19, the reference to ``AU section
322, The Auditor's Consideration of the Internal Audit Function in an
Audit of Financial Statements'' is replaced with ``AS 2605,
Consideration of the Internal Audit Function.''
    d. In the second sentence of paragraph .33, the reference to ``AU
section 316A, Consideration of Fraud in a Financial Statement Audit,
paragraphs .16 through .19'' is replaced with ``AS 2401, Consideration
of Fraud in a Financial Statement Audit.''
    e. In the last sentence of paragraph .43, the reference to ``AU
section 336'' is replaced with ``AS 1210.''
    f. In the last sentence of paragraph .44, the reference to ``AU
section 322, The Auditor's Consideration of the Internal Audit Function
in an Audit of Financial Statements'' is replaced with ``AS 2605,
Consideration of the Internal Audit Function.''
    g. In the second sentence of paragraph .47, the reference to ``AU
section 325, Communication of Internal Control Related Matters Noted in
an Audit'' is replaced with ``AS 1305, Communications About Control
Deficiencies in an Audit of Financial Statements.''
    h. In the last sentence of paragraph .48, the reference to ``AU
section 350'' is replaced with ``AS 2315.''
    i. In the first sentence of paragraph .50, the reference to ``AU
section 560'' is replaced with ``AS 2801.''
    j. In footnote 22 to paragraph .68, the reference to ``AU section
333, Management Representations, paragraph .09'' is replaced with
``Paragraph .09 of AS 2805, Management Representations.''
AT sec. 701, ``Management's Discussion and Analysis''
    AT sec. 701, ``Management's Discussion and Analysis,'' is amended
as follows:
    a. The following note is added at the end of paragraph .01:
    Note: In connection with an engagement performed in accordance with
this attestation standard, whenever the practitioner is required to
make reference in a report to attestation standards established by the
American Institute of Certified Public Accountants or auditing
standards generally accepted in the United States of America, the
practitioner must instead refer to ``the standards of the Public
Company Accounting Oversight Board (United States).'' A practitioner
must also include the city and state (or city and country, in the case
of non-U.S. practitioners) from which the practitioner's report has
been issued.
    b. In the last sentence of footnote 6 to paragraph .02:
     The reference to ``Statement on Auditing Standards (SAS)
No. 71'' is deleted.
     The parenthetic reference to ``AU section 722, Interim
Financial Information'' is replaced with ``AS 4105, Reviews of Interim
Financial Information.''
    c. In footnote 7 to paragraph .02, the reference to ``AU section
634'' is replaced with ``AS 6101.''
    d. In paragraph .11a, the reference to ``AU section 722, Interim
Financial Information,'' is replaced with ``AS 4105.''
    e. In item (2) of paragraph .14a, the reference to ``AU section
722'' is replaced with ``AS 4105.''
    f. In footnote 16 to paragraph .20:
     In the first sentence, the reference to ``AU section 329,
Analytical Procedures'' is replaced with ``AS 2305, Substantive
Analytical Procedures.''
     In the last sentence, the reference to ``AU section 329''
is replaced with ``AS 2305.''
    g. The first sentence of paragraph .39 is deleted.
    h. Footnote 18 to paragraph .44 is deleted.
    i. In paragraph .47:
     In the third sentence, the reference to ``AU section 336''
is replaced with ``AS 1210.''
     In the last sentence, the reference to ``AU section 311,
Planning and Supervision'' is replaced with ``AS 1201, Supervision of
the Audit Engagement.''
    j. In the last sentence of paragraph .48, the reference to ``AU
section 322, The Auditor's Consideration of the Internal Audit Function
in an Audit of Financial Statements'' is replaced with ``AS 2605,
Consideration of the Internal Audit Function.''
    k. In the last sentence of paragraph .58:
     The reference to ``AU section 325, Communication of
Internal Control Related Matters Noted in an Audit'' is replaced with
``AS 1305, Communications About Control Deficiencies in an Audit of
Financial Statements.''
     The reference to ``AU section 380, Communication With
Audit Committees'' is replaced with ``AS 1301, Communications with
Audit Committees.''
    l. In footnote 24 to paragraph .66:
     In the second sentence, the reference to ``AU section
561'' is replaced with ``AS 2905.''
     In the last sentence, the reference to ``AU section 711,
Filings Under Federal Securities Statutes'' is replaced with ``AS 4101,
Responsibilities Regarding Filings Under Federal Securities Statutes.''
    m. In footnote 25 to paragraph .66c, the reference to ``AU section
337'' is replaced with ``AS 2505.''
    n. In the first sentence of paragraph .102, the reference to ``AU
section 315, Communications Between Predecessor and Successor Audits''
is replaced with ``AS 2610, Initial Audits--Communications Between
Predecessor and Successor Audits.''
    o. In paragraph .106:
     In the second sentence, the reference to ``SAS No. 8'' is
replaced with ``AS 2710.''
     In the last sentence, the reference to ``AU section 711,
Filings Under Federal Securities Statutes,'' is replaced with ``AS
4101.''
    p. In footnote 30 to paragraph .107, the reference to ``AU section
550, Information in Documents Containing Audited Financial
Statements,'' is replaced with ``AS 2710.''

    q. In the last sentence of paragraph .108, the reference to ``AU
section 317, Illegal Acts, paragraphs .17, .22, and .23)'' is replaced
with ``paragraphs .17, .22, and .23 of AS 2405, Illegal Acts by
Clients.''
    r. In the last sentence of paragraph .109, the reference to ``AU
section 316'' is replaced with ``AS 2401.''
    s. In footnote 31 to paragraph .110:
     In the first sentence, the reference to ``AU section 333,
Management Representations, paragraph .09'' is replaced with
``Paragraph .09 of AS 2805, Management Representations.''
     In the second sentence, the reference to ``AU section
711.10'' is replaced with ``AS 4101.10.''
    t. In the title of Appendix D:
     The reference to ``SAS No. 8'' is replaced with ``AS
2710.''
     Footnote * is deleted.
    u. In the table in paragraph .117, the column heading ``SAS No. 8''
is replaced with ``AS 2710.''
Quality Control Standards
QC sec. 20, ``System of Quality Control for a CPA Firm's Accounting and
Auditing Practice''
    QC section (``sec.'') 20, ``System of Quality Control for a CPA
Firm's Accounting and Auditing Practice,'' is amended as follows:
    a. In the first sentence of paragraph .10, the reference to ``AU
section 220'' is replaced with ``AS 1005.''
    b. In footnote 7 to paragraph .10, the reference to ``AU section
220.02'' is replaced with ``AS 1005.02.''
    c. In the last sentence of paragraph .18, the reference to ``PCAOB
Auditing Standard No. 7'' is replaced with ``AS 1220.''
Ethics and Independence Standards
ET sec. 101, ``Independence''
    ET sec. 101, ``Independence,'' is amended as follows:
    a. The note in paragraph .05 is deleted.
ET sec. 102, ``Integrity and Objectivity''
    ET sec. 102, ``Integrity and Objectivity,'' is amended as follows:
    a. In footnote 1 to paragraph .05, the reference to ``paragraph
5.b. of Auditing Standard No. 10, Supervision of the Audit Engagement,
and paragraph 12.d. of Auditing Standard No. 3, Audit Documentation''
is replaced with ``paragraph .05b of AS 1201, Supervision of the Audit
Engagement, and paragraph .12d of AS 1215, Audit Documentation.''

II. Board's Statement of the Purpose of, and Statutory Basis for, the
Proposed Rules

    In its filing with the Commission, the Board included statements
concerning the purpose of, and basis for, the proposed rules and
discussed comments it received on the proposed rules. The text of these
statements may be examined at the places specified in Item IV below.
The Board has prepared summaries, set forth in sections A, B, and C
below, of the most significant aspects of these statements. In
addition, the Board is requesting that the Commission approve the
proposed rules, pursuant to Section 103(a)(3)(C) of the Sarbanes-Oxley
Act, for application to audits of emerging growth companies (``EGCs''),
as that term is defined in Section 3(a)(80) of the Securities Exchange
Act of 1934 (``Exchange Act''). The Board's request is set forth in
section D.

A. Board's Statement of the Purpose of, and Statutory Basis for, the
Proposed Rules

(a) Purpose
Introduction
    The Board is reorganizing its auditing standards using a topical
structure and a single, integrated numbering system. To implement this
reorganization, the Board is adopting amendments to its auditing
standards and rules and is also rescinding certain auditing standards
that are no longer necessary under the reorganization. These amendments
do not impose new requirements on auditors or change the substance of
the requirements for performing and reporting on audits under PCAOB
standards. Specifically, the amendments to implement the reorganization
include updates to the section numbers, cross references, and titles of
certain standards. Other related amendments include, among others,
removing standards that are no longer necessary, replacing references
to generally accepted auditing standards, and updating certain PCAOB
rules to reflect the reorganized auditing standards.
    The new organizational structure is intended to improve the
usability of the Board's standards, including helping users navigate
the standards more easily. To facilitate navigation, the standards are
organized into a logical structure by topic areas that generally follow
the flow of the audit process. For example, auditing standards that
apply to procedures performed near the completion of the audit are
arranged in the same area. The reorganization also uses a numbering
convention that is different from conventions used by other standard
setters, which should help to avoid the potential for confusion between
the standards of the Board and those of other standard setters.
Background and the Need for Improvement
    In April 2003, the Board adopted, on an interim, transitional
basis, the generally accepted auditing standards, originally issued by
the Auditing Standards Board (``ASB'') of the American Institute of
Certified Public Accountants (``AICPA''), that were in existence at the
time.\2\ When the Board adopted those auditing standards, it continued
to use the topical organization and reference numbers (``AU sections'')
in the ASB's then-existing codification of its standards.\3\ Auditing
standards issued by the Board (``AS standards'') were not codified or
otherwise organized by topic, but were numbered in sequential order
based upon when they were issued. Thus far, the Board has issued 18
auditing standards (AS Nos. 1-18), which have superseded 12 interim
auditing standards and amended the majority of the remaining interim
auditing standards to varying degrees. As a result, the Board's
auditing standards are organized using two separate numbering systems:
(i) The numbering system used by the ASB when the Board adopted the
interim standards and (ii) the numbering system used by the Board for
the standards it has issued.
---------------------------------------------------------------------------

    \2\ See Establishment of Interim Professional Auditing
Standards, PCAOB Release No. 2003-006 (Apr. 18, 2003) (adopting Rule
3200T, Interim Auditing Standards).
    \3\ Since 2003, the ASB has modified the organizational
structure of its standards as part of its Clarity Project.
---------------------------------------------------------------------------

    The Board undertook a project to consider the reorganization of the
Board's auditing standards. In 2013, the Board proposed to reorganize
its auditing standards using a single, integrated numbering system and
a topical structure that generally follows the flow of the audit
process (``original proposal'').\4\ The proposed reorganization was
intended to enhance the usability of the standards, help users navigate
the standards more easily (for example, by helping users find the
relevant standard for a particular area of the audit), help avoid
potential confusion between the Board's standards and the standards of
the International Auditing and Assurance Standards Board (``IAASB'') or
the ASB, and provide a structure for updating

PCAOB standards in the future. The original proposal also included
amendments to rescind certain interim auditing standards that the Board
believed were no longer necessary.
---------------------------------------------------------------------------

    \4\ See Proposed Framework for Reorganization of PCAOB Auditing
Standards and Related Amendments to PCAOB Auditing Standards and
Rules, PCAOB Release 2013-002 (March 26, 2013).
---------------------------------------------------------------------------

    In May 2014, the Board issued a supplemental request for comment
(``supplemental request'') on the original proposal.\5\ The
supplemental request included proposed line-by-line amendments to PCAOB
auditing standards and rules necessary to implement the proposed
reorganization, along with certain changes to the reorganization as
presented in the original proposal.\6\ The supplemental request also
reopened the comment period on the original proposal to seek further
comment on matters discussed in the original proposal, as well as on
the implementing amendments in the supplemental request.
---------------------------------------------------------------------------

    \5\ See Supplemental Request for Comment: Proposed Framework for
Reorganization of PCAOB Auditing Standards and Related Amendments to
PCAOB Auditing Standards and Rules, PCAOB Release 2014-001 (May 7,
2014).
    \6\ At the same time, the Board released on its Web site an
online demonstration version that presented the existing auditing
standards as they would look if reorganized according to the
proposed reorganization. The demonstration version of the
reorganized auditing standards can be accessed at http://pcaobus.org/Rules/Rulemaking/Pages/Docket040.aspx.
---------------------------------------------------------------------------

The Reorganization

    After considering the suggestions from commenters on the original
proposal and supplemental request, the Board is adopting amendments to
reorganize the standards substantially as proposed, with some
refinements as described below.
    Under the reorganization, the individual standards will be grouped
into the following topical categories:
     General Auditing Standards--Standards on broad auditing
principles, concepts, activities, and communications;
     Audit Procedures--Standards for planning and performing
audit procedures and for obtaining audit evidence;
     Auditor Reporting--Standards for auditors' reports;
     Matters Relating to Filings Under Federal Securities
Laws--Standards on certain auditor responsibilities relating to SEC
filings for securities offerings and reviews of interim financial
information; and
     Other Matters Associated with Audits--Standards for other
work performed in conjunction with an audit of an issuer or of a broker
or dealer.
    Within each category are subcategories to further organize similar
topics, such as standards related to auditor communications in the
``General Auditing Standards'' category. This section includes an
illustration of the reorganization, including the categories and
subcategories for PCAOB auditing standards. The integrated referencing
system uses an ``AS'' prefix to identify the auditing standards, which
is consistent with common practice for describing standards issued by
the Board (for example, ``AS No. 7'' for the standard on engagement
quality review).
    Each standard is assigned a unique section number, based on a four-
digit numbering system.\7\ Using a four-digit system facilitates the
grouping of auditing standards into logical categories and
subcategories by topic and avoids potential confusion with the
standards of the IAASB or the ASB.\8\
---------------------------------------------------------------------------

    \7\ Each standard retains its current paragraph numbers, but the
paragraph number format of the standards issued by the Board has
been changed to match the format of the paragraph numbers of its
other auditing standards. Each paragraph is numbered ``.01,''
``.02,'' etc. For example, the reference for the first paragraph of
the standard on audit planning will be ``AS 2101.01.''
    \8\ After the Board adopted the standards issued by the ASB, the
ASB undertook a project to clarify its auditing standards that
resulted in, among other things, a renumbering and reorganization of
their standards. Consequently, the PCAOB's interim auditing standard
AU section (``sec.'') 230, Due Professional Care in the Performance
of Work, for example, described the auditor's responsibility for
applying due professional care in planning and performing audits,
whereas the ASB standard with the same number now relates to audit
documentation.
---------------------------------------------------------------------------

    The topical organization also provides a structure for future
updates to PCAOB auditing standards. For example, future auditing
standards will be issued as new or replacement sections and paragraphs
within the new structure.
Changes to PCAOB Standards and Rules
    Item I presents the amendments to PCAOB standards and rules to
implement the reorganization of the PCAOB's auditing standards and
other related amendments. These amendments are technical changes that
include rescinding certain interim auditing standards that the Board
believes are no longer necessary and eliminating certain inoperative
language or references. The changes do not impose new requirements on
auditors or change the substance of the requirements for performing and
reporting on audits under PCAOB standards.
Changes to PCAOB Standards
    The amendments primarily update section numbers, update cross-
references among standards using a new numbering system, and change the
titles of certain standards, as described below. For example, for AU
sec. 324, Service Organizations, the amendments replace ``AU sec.''
with ``AS'' and ``324'' with ``2601.'' The title of this standard is
changed to ``Consideration of an Entity's Use of a Service
Organization.'' As described above, the paragraph numbers within the
standard remain the same. For example, AU sec. 324.05 becomes AS
2601.05.
    Other amendments rescind certain interim standards and remove or
update certain terms and phrases in the standards, such as references
to generally accepted auditing standards (``GAAS''). Those changes are
discussed in the following paragraphs.

Interim Auditing Standards To Be Rescinded

    As proposed, the Board is rescinding the following interim
standards: \9\
---------------------------------------------------------------------------

    \9\ The original proposal also discussed why the Board proposed
to rescind the standards and why AU sec. 534, Reporting on Financial
Statements Prepared for Use in Other Countries, would not appear in
the reorganized PCAOB auditing standards.
---------------------------------------------------------------------------

     AU sec. 150, Generally Accepted Auditing Standards
     AU sec. 201, Nature of the General Standards
     AU sec. 410, Adherence to Generally Accepted Accounting
Principles
     AU sec. 532, Restricting the Use of an Auditor's Report
     AU sec. 901, Public Warehouses--Controls and Auditing
Procedures for Goods Held

Interpretive Publications

    Among other things, AU sec. 150 described the auditor's
responsibilities regarding interpretive publications, which consist of
auditing interpretations of the interim auditing standards, appendices
to the interim auditing standards, auditing guidance included in AICPA
Audit and Accounting Guides, and AICPA auditing Statements of
Position.\10\
---------------------------------------------------------------------------

    \10\ See AU sec. 150.06. Pursuant to PCAOB Rule 3200T, the
auditor's responsibilities regarding interpretive publications
relate to the publications described in AU sec. 150.06 that were in
existence as of April 16, 2003, to the extent not amended or
superseded by the Board.
---------------------------------------------------------------------------

    The Board proposed to retain almost all \11\ of the AICPA auditing
interpretations and to present the auditing interpretations separately
from the auditing standards on the Board's

Web site in a manner similar to PCAOB guidance. As discussed in the
supplemental request, the proposed amendments numbered the
interpretations consecutively using a two-digit section number that
followed an ``AI'' prefix and used title language in the form of
``Auditing Interpretations of AS xxxx.'' The auditing interpretations
will be presented on the guidance page of the Board's Web site,
consistent with their presentation in the online demonstration version
that accompanied the supplemental request. Because the Board proposed
to retain the auditing interpretations, the Board similarly proposed to
retain the existing requirement that auditors be aware of and consider
the auditing interpretations.\12\
---------------------------------------------------------------------------

    \11\ As discussed in the original proposal, the Board proposed
to not retain auditing interpretations related to standards that
will not be in the reorganization, specifically, the interpretations
of AU sec. 410 and AU sec. 534. Also, the Board proposed to remove
interpretation 16 (paragraphs .76-.84) of AU sec. 9508, Reports on
Audited Financial Statements: Auditing Interpretations of Section
508, which does not relate to audits of issuers, brokers, or
dealers.
    \12\ The Board proposed to add this requirement to AS 1001,
Responsibilities and Functions of the Independent Auditor.
---------------------------------------------------------------------------

    The Board is adopting the organizational structure and numbering of
the auditing interpretations as proposed. The Board also proposed to
retain almost all of the appendices \13\ to the interim auditing
standards and to continue presenting those appendices together with
their related auditing standards in the same manner that the appendices
to Board-issued standards are presented.\14\ In addition, the Board
proposed to retain the American Bar Association's Statement of Policy
Regarding Lawyers' Responses to Auditors' Requests for Information,
currently included as Exhibit II of AU sec. 337, Inquiry of a Client's
Lawyer Concerning Litigation, Claims, and Assessments.\15\ The Board
received no specific comments on these matters. The Board is retaining
the interim standards' appendices and Exhibit II of AU sec. 337 in the
reorganized standards as proposed.
---------------------------------------------------------------------------

    \13\ The Board proposed to delete the appendices that contain
paragraphs .86 and .87 of AU sec. 316, Consideration of Fraud in a
Financial Statement Audit, which provide amendments to AU sec. 230,
Due Professional Care in the Performance of Work, and AU sec. 333,
Management Representations, respectively, because these amendments
already are reflected in the standards themselves.
    \14\ Appendices to Board-issued standards are an integral part
of those standards. See Auditing Standards Related to the Auditor's
Assessment of and Response to Risk and Related Amendments to PCAOB
Standards, PCAOB Release No. 2010-004, at A10-3 (August 5, 2010).
    \15\ The Board also proposed to delete the exhibit that includes
AU sec. 316.88 as it provides guidance to management regarding
antifraud programs and controls. In addition, the Board proposed to
delete Exhibit I of AU sec. 337 because it merely presents excerpts
of Financial Accounting Standard Board (``FASB'') Statement No. 5,
Accounting for Contingencies, which are set forth in the FASB's
Accounting Standards Codification.
---------------------------------------------------------------------------

    The Board also proposed and is adopting amendments to remove
references to AICPA Audit and Accounting Guides and AICPA auditing
Statements of Position because the guides referenced in PCAOB standards
are outdated.\16\
---------------------------------------------------------------------------

    \16\ AICPA Audit and Accounting Guides and auditing Statements
of Position referenced in PCAOB standards are the editions of those
publications as in existence on April 16, 2003.
---------------------------------------------------------------------------

Other Changes to PCAOB Standards

    In the supplemental request, the Board proposed amendments to
replace references to GAAS throughout the auditing standards with
references to the standards of the PCAOB or PCAOB auditing standards
and, accordingly, to supersede Auditing Standard No. 1, References in
Auditors' Reports to the Standards of the Public Company Accounting
Oversight Board. Commenters generally supported these changes.
    Auditing Standard No. 1 provides that whenever the auditor is
required by existing standards to reference GAAS in a report, the
auditor must instead refer to ``the standards of the Public Company
Accounting Oversight Board (United States).'' Auditing Standard No. 1
also includes a requirement for the report to include the city and
state (or city and country) of the auditor. Because Auditing Standard
No. 1 also applies to reports issued in accordance with the PCAOB's
attestation standards, the Board proposed similar amendments to update
GAAS references and to include the city and state (or city and country)
in the interim attestation standards. The Board is adopting the
amendments and superseding Auditing Standard No. 1 as proposed.
    The Board also proposed to eliminate certain inoperative language
in auditing standards and interpretations and to eliminate inoperative
references to AICPA standards or rules. For example, the Board proposed
to remove references to provisions of the AICPA Code of Professional
Conduct or ethics rules that were not adopted as interim standards of
the PCAOB and to replace references to AICPA standards with references
to PCAOB standards, where appropriate.\17\ As part of this effort the
Board also proposed to remove references to superseded standards.\18\
The Board is adopting the amendments as proposed except for the
proposed amendments to interpretation 4 of AT sec. 9101, Attest
Engagements: Attest Engagements Interpretations of Section 101, which
addresses letters to regulators when they request access to or copies
of attestation documentation. This interpretation includes illustrative
letters preceded by introductory paragraphs that discuss the use of
such letters. The introductory paragraphs include a reference to a
superseded auditing standard and auditing interpretation. The proposed
amendments would have removed the introductory paragraphs, leaving only
the illustrative letters to this interpretation. Commenters stated that
the introductory paragraphs are necessary to provide context to the
illustrative letters. The Board has revised the amendments to include a
paragraph that introduces the illustrative letters while eliminating
the superseded references.
---------------------------------------------------------------------------

    \17\ For example, the Board proposed to delete from AS 1005,
Independence, and AS 2605, Consideration of the Internal Audit
Function, references to AICPA independence requirements that were
never adopted by the Board. Similar types of changes were made to AS
2705, Required Supplementary Information, AS 6101, Letters for
Underwriters and Certain Other Requesting Parties, AS 6105, Reports
on the Application of Accounting Principles, AI 24, Special Reports:
Auditing Interpretations of AS 3305, and AI 25, Association with
Financial Statements: Auditing Interpretations of AS 3320.
    \18\ For example, the Board proposed to remove references to
superseded standards in AS 3305, Special Reports, AS 4105, Reviews
of Interim Financial Information, AI 10, Part of the Audit Performed
by Other Independent Auditors: Auditing Interpretations of AS 1205,
AI 23, Reports on Audited Financial Statements: Auditing
Interpretations of AS 3101, AI 24, Special Reports: Auditing
Interpretations of AS 3305, AT Section 701, Management's Discussion
and Analysis, AT Section 9101, Attest Engagements: Attest
Engagements Interpretations of Section 101, and ET Section 101,
Independence.
---------------------------------------------------------------------------

Changes to PCAOB Rules
    In conjunction with the reorganization of PCAOB auditing standards,
the Board proposed to amend PCAOB Rule 3200T, which requires auditors
to comply with the Board's interim auditing standards, to remove (i)
the reference to AU sec. 150, which, as discussed above, would not be
included in the reorganized standards, and (ii) terms such as ``interim
auditing standards'' and ``generally accepted auditing standards.''
Those terms are not relevant under the proposed reorganization and
could be confusing to some users of the standards. In addition, the
Board would make the rule a permanent rule rather than a temporary rule
and, therefore, would remove the word ``Interim'' from the title of the
rule.\19\ The amended rule, as proposed, would require compliance with
all PCAOB auditing standards.
---------------------------------------------------------------------------

    \19\ The Board also proposed a conforming amendment to Rule
3101, Certain Terms Used in Auditing and Related Professional
Practice Standards, as described in Item I. The Board received no
comments on that amendment and is adopting it as proposed. The
amendment does not change the meaning or scope of that rule.

---------------------------------------------------------------------------

    The Board received no comments on the proposed amendments to Rule
3200T and is adopting them as proposed. These changes do not modify the
auditor's existing responsibilities for complying with PCAOB auditing
standards. Instead, the changes update Rule 3200T so that it describes,
in one rule, the auditor's responsibilities for complying with all of
the auditing standards included in the reorganization--those that the
Board adopted as interim standards in 2003 and those that the Board has
adopted since.
Additional Amendments for Auditing Standard No. 18
    The Board has adopted certain additional amendments beyond those
included in the original proposal or supplemental request.
Specifically, on June 10, 2014, after the supplemental request, the
Board adopted Auditing Standard No. 18, Related Parties, amendments to
certain PCAOB auditing standards regarding significant unusual
transactions, and certain other amendments to PCAOB auditing
standards.\20\ The Board is adopting additional amendments to
incorporate Auditing Standard No. 18 and the other amendments into the
reorganized auditing standards.\21\ Notably, these amendments, like the
other adopted amendments, are technical in nature and do not
substantively affect the requirements in PCAOB standards or rules.
---------------------------------------------------------------------------

    \20\ See Auditing Standard No. 18--Related Parties, Amendments
to Certain PCAOB Auditing Standards Regarding Significant Unusual
Transactions, and Other Amendments to PCAOB Auditing Standards,
PCAOB Release No. 2014-002 (June 10, 2014).
    \21\ Separately, the Board also is making a technical amendment
to AS 2610.09 (formerly AU sec. 315.09) to consolidate the bullet
points in the paragraph, and AS 2705.09 (formerly AU sec 558.09) to
update an outdated reference. Item I includes these amendments.

        Illustration of the Reorganized PCAOB Auditing Standards
------------------------------------------------------------------------

------------------------------------------------------------------------
General Auditing Standards
------------------------------------------------------------------------
1000..............................  General Principles and
                                     Responsibilities
1001..............................  Responsibilities and Functions of
                                     the Independent Auditor
1005..............................  Independence
1010..............................  Training and Proficiency of the
                                     Independent Auditor
1015..............................  Due Professional Care in the
                                     Performance of Work
1100..............................  General Concepts
1101..............................  Audit Risk
1105..............................  Audit Evidence
1110..............................  Relationship of Auditing Standards
                                     to Quality Control Standards \22\
1200..............................  General Activities
1201..............................  Supervision of the Audit Engagement
1205..............................  Part of the Audit Performed by Other
                                     Independent Auditors
1210..............................  Using the Work of a Specialist
1215..............................  Audit Documentation
1220..............................  Engagement Quality Review
1300..............................  Auditor Communications
1301..............................  Communications with Audit Committees
1305..............................  Communications About Control
                                     Deficiencies in an Audit of
                                     Financial Statements
------------------------------------------------------------------------
Audit Procedures
------------------------------------------------------------------------
2100..............................  Audit Planning and Risk Assessment
2101..............................  Audit Planning
2105..............................  Consideration of Materiality in
                                     Planning and Performing an Audit
2110..............................  Identifying and Assessing Risks of
                                     Material Misstatement
2200..............................  Auditing Internal Control Over
                                     Financial Reporting
2201..............................  An Audit of Internal Control Over
                                     Financial Reporting That Is
                                     Integrated with An Audit of
                                     Financial Statements
2300..............................  Audit Procedures in Response to
                                     Risks--Nature, Timing, and Extent
2301..............................  The Auditor's Responses to the Risks
                                     of Material Misstatement
2305..............................  Substantive Analytical Procedures
2310..............................  The Confirmation Process
2315..............................  Audit Sampling
2400..............................  Audit Procedures for Specific
                                     Aspects of the Audit
2401..............................  Consideration of Fraud in a
                                     Financial Statement Audit
2405..............................  Illegal Acts by Clients
2410..............................  Related Parties
2415..............................  Consideration of an Entity's Ability
                                     to Continue as a Going Concern \23\
2500..............................  Audit Procedures for Certain
                                     Accounts or Disclosures
2501..............................  Auditing Accounting Estimates
2502..............................  Auditing Fair Value Measurements and
                                     Disclosures
2503..............................  Auditing Derivative Instruments,
                                     Hedging Activities, and Investments
                                     in Securities
2505..............................  Inquiry of a Client's Lawyer
                                     Concerning Litigation, Claims, and
                                     Assessments
2510..............................  Auditing Inventories \24\
2600..............................  Special Topics
2601..............................  Consideration of an Entity's Use of
                                     a Service Organization \25\
2605..............................  Consideration of the Internal Audit
                                     Function \26\
2610..............................  Initial Audits--Communications
                                     Between Predecessor and Successor
                                     Auditors \27\
2700..............................  Auditor's Responsibilities Regarding
                                     Supplemental and Other Information
2701..............................  Auditing Supplemental Information
                                     Accompanying Audited Financial
                                     Statements
2705..............................  Required Supplementary Information
2710..............................  Other Information in Documents
                                     Containing Audited Financial
                                     Statements \28\
2800..............................  Concluding Audit Procedures
2801..............................  Subsequent Events
2805..............................  Management Representations
2810..............................  Evaluating Audit Results
2815..............................  The Meaning of ``Present Fairly in
                                     Conformity with Generally Accepted
                                     Accounting Principles''
2820..............................  Evaluating Consistency of Financial
                                     Statements
2900..............................  Post-Audit Matters
2901..............................  Consideration of Omitted Procedures
                                     After the Report Date
2905..............................  Subsequent Discovery of Facts
                                     Existing at the Date of the
                                     Auditor's Report
------------------------------------------------------------------------
Auditor Reporting
------------------------------------------------------------------------
3100..............................  Reporting on Audits of Financial
                                     Statements
3101..............................  Reports on Audited Financial
                                     Statements \29\
3110..............................  Dating of the Independent Auditor's
                                     Report
3200..............................  Reserved
3300..............................  Other Reporting Topics
3305..............................  Special Reports
3310..............................  Special Reports on Regulated
                                     Companies \30\
3315..............................  Reporting on Condensed Financial
                                     Statements and Selected Financial
                                     Data
3320..............................  Association with Financial
                                     Statements
------------------------------------------------------------------------
Matters Relating to Filings Under Federal Securities Laws
------------------------------------------------------------------------
4101..............................  Responsibilities Regarding Filings
                                     Under Federal Securities Statutes
                                     \31\
4105..............................  Reviews of Interim Financial
                                     Information \32\
5000..............................  Reserved
------------------------------------------------------------------------
Other Matters Associated with Audits
------------------------------------------------------------------------
6101..............................  Letters for Underwriters and Certain
                                     Other Requesting Parties
6105..............................  Reports on the Application of
                                     Accounting Principles
6110..............................  Compliance Auditing Considerations
                                     in Audits of Recipients of
                                     Governmental Financial Assistance
                                     \33\
6115..............................  Reporting on Whether a Previously
                                     Reported Material Weakness
                                     Continues to Exist
------------------------------------------------------------------------

---------------------------------------------------------------------------

    \22\ AU sec. 161 is entitled, The Relationship of Generally
Accepted Auditing Standards to Quality Control Standards. The Board
is amending the title of this standard to make it more consistent in
style with other standards without changing its substance.
    \23\ AU sec. 341 is entitled, The Auditor's Consideration of an
Entity's Ability to Continue as a Going Concern. The Board is
amending the title of this standard to make it more consistent in
style with other standards without changing its substance.
    \24\ AU sec. 331 is entitled, Inventories. The Board is amending
the title of this standard to make it more consistent in style with
other standards without changing its substance.
    \25\ AU sec. 324 is entitled, Service Organizations. The Board
is amending the title of this standard to make it more consistent in
style with other standards without changing its substance.
    \26\ AU sec. 322 is entitled, The Auditor's Consideration of the
Internal Audit Function in an Audit of Financial Statements. The
Board is amending the title of this standard to make it more
consistent in style with other standards without changing its
substance.
    \27\ AU sec. 315 is entitled, Communications Between Predecessor
and Successor Auditors. The Board is amending the title of this
standard to clarify the subject of the standard without changing its
substance. Additionally, this standard addresses audits of financial
statements that have been audited previously.
    \28\ The Board has proposed a new auditing standard, The
Auditor's Responsibilities Regarding Other Information in Certain
Documents Containing Audited Financial Statements and the Related
Auditor's Report. See PCAOB Release No. 2013-005 (August 13, 2013).
If adopted by the Board and approved by the SEC, that proposed
standard would become AS 2710.
    \29\ The Board has proposed a new auditing standard, The
Auditor's Report on an Audit of Financial Statements When the
Auditor Expresses an Unqualified Opinion. See Proposed Auditing
Standards--The Auditor's Report on an Audit of Financial Statements
When the Auditor Expresses an Unqualified Opinion; The Auditor's
Responsibilities Regarding Other Information in Certain Documents
Containing Audited Financial Statements and the Related Auditor's
Report; and Related Amendments to PCAOB Standards, PCAOB Release No.
2013-005 (August 13, 2013). If adopted by the Board and approved by
the SEC, that proposed standard would substantially amend AS 3101.
    \30\ AU sec. 544 is entitled, Lack of Conformity With Generally
Accepted Accounting Principles. The Board is amending the title of
this standard to clarify the subject of the standard without
changing its substance.
    \31\ AU sec. 711 is entitled, Filings Under Federal Securities
Statutes. The Board is amending the title of this standard to
clarify the subject of the standard without changing its substance.
    \32\ AU sec. 722 is entitled, Interim Financial Information. The
Board is amending the title of this standard to clarify the subject
of the standard without changing its substance.
    \33\ AU sec. 801 is entitled, Compliance Auditing Considerations
in Audits of Governmental Entities and Recipients of Governmental
Financial Assistance. The Board is amending the title of this
standard to clarify the subject of the standard without changing its
substance.
---------------------------------------------------------------------------

Comparison of Existing PCAOB Auditing Standards to Reorganization of
PCAOB Auditing Standards
    The following presents the existing PCAOB auditing standards (``AS
No.'' or ``AU sec.'') along with their respective AS reference under
the adopted reorganization of PCAOB auditing standards.
    Standards that note ``Rescind'' in the AS Reference column are
existing standards that the Board is rescinding in conjunction with the
reorganization.
---------------------------------------------------------------------------

    \34\ Auditing Standard No. 1 is superseded as a result of the
amendments made to other standards.

------------------------------------------------------------------------
 PCAOB reference  (AU section
          or AS No.)                 Current title        AS reference
------------------------------------------------------------------------
AS No. 1......................  References in           Supersede.\34\
                                 Auditors' Reports to
                                 the Standards of the
                                 Public Company
                                 Accounting Oversight
                                 Board.
AS No. 3......................  Audit Documentation...  1215.
AS No. 4......................  Reporting on Whether a  6115.
                                 Previously Reported
                                 Material Weakness
                                 Continues to Exist.
AS No. 5......................  An Audit of Internal    2201.
                                 Control Over
                                 Financial Reporting
                                 That Is Integrated
                                 with An Audit of
                                 Financial Statements.
AS No. 6......................  Evaluating Consistency  2820.
                                 of Financial
                                 Statements.
AS No. 7......................  Engagement Quality      1220.
                                 Review.
AS No. 8......................  Audit Risk............  1101.
AS No. 9......................  Audit Planning........  2101.
AS No. 10.....................  Supervision of the      1201.
                                 Audit Engagement.
AS No. 11.....................  Consideration of        2105.
                                 Materiality in
                                 Planning and
                                 Performing an Audit.
AS No. 12.....................  Identifying and         2110.
                                 Assessing Risks of
                                 Material Misstatement.
AS No. 13.....................  The Auditor's           2301.
                                 Responses to the
                                 Risks of Material
                                 Misstatement.
AS No. 14.....................  Evaluating Audit        2810.
                                 Results.
AS No. 15.....................  Audit Evidence........  1105.
AS No. 16.....................  Communications with     1301.
                                 Audit Committees.
AS No. 17.....................  Auditing Supplemental   2701.
                                 Information
                                 Accompanying Audited
                                 Financial Statements.
AS No. 18.....................  Related Parties.......  2410.
AU sec. 110...................  Responsibilities and    1001.
                                 Functions of the
                                 Independent Auditor.
AU sec. 150...................  Generally Accepted      Rescind.
                                 Auditing Standards.
AU sec. 161...................  The Relationship of     1110.
                                 Generally Accepted
                                 Auditing Standards to
                                 Quality Control
                                 Standards.
AU sec. 201...................  Nature of the General   Rescind.
                                 Standards.
AU sec. 210...................  Training and            1010.
                                 Proficiency of the
                                 Independent Auditor.
AU sec. 220...................  Independence..........  1005.
AU sec. 230...................  Due Professional Care   1015.
                                 in the Performance of
                                 Work.
AU sec. 315...................  Communications Between  2610.
                                 Predecessor and
                                 Successor Auditors.
AU sec. 316...................  Consideration of Fraud  2401.
                                 in a Financial
                                 Statement Audit.
AU sec. 317...................  Illegal Acts by         2405.
                                 Clients.
AU sec. 322...................  The Auditor's           2605.
                                 Consideration of the
                                 Internal Audit
                                 Function in an Audit
                                 of Financial
                                 Statements.
AU sec. 324...................  Service Organizations.  2601.
AU sec. 325...................  Communications About    1305.
                                 Control Deficiencies
                                 in an Audit of
                                 Financial Statements.
AU sec. 328...................  Auditing Fair Value     2502.
                                 Measurements and
                                 Disclosures.
AU sec. 329...................  Substantive Analytical  2305.
                                 Procedures.
AU sec. 330...................  The Confirmation        2310.
                                 Process.
AU sec. 331...................  Inventories...........  2510.
AU sec. 332...................  Auditing Derivative     2503.
                                 Instruments, Hedging
                                 Activities, and
                                 Investments in
                                 Securities.
AU sec. 333...................  Management              2805.
                                 Representations.
AU sec. 336...................  Using the Work of a     1210.
                                 Specialist.
AU sec. 337...................  Inquiry of a Client's   2505.
                                 Lawyer Concerning
                                 Litigation, Claims,
                                 and Assessments.

AU sec. 341...................  The Auditor's           2415.
                                 Consideration of an
                                 Entity's Ability to
                                 Continue as a Going
                                 Concern.
AU sec. 342...................  Auditing Accounting     2501.
                                 Estimates.
AU sec. 350...................  Audit Sampling........  2315.
AU sec. 390...................  Consideration of        2901.
                                 Omitted Procedures
                                 After the Report Date.
AU sec. 410...................  Adherence to Generally  Rescind.
                                 Accepted Accounting
                                 Principles.
AU sec. 411...................  The Meaning of Present  2815.
                                 Fairly in Conformity
                                 With Generally
                                 Accepted Accounting
                                 Principles.
AU sec. 504...................  Association With        3320.
                                 Financial Statements.
AU sec. 508...................  Reports on Audited      3101.
                                 Financial Statements.
AU sec. 530...................  Dating of the           3110.
                                 Independent Auditor's
                                 Report.
AU sec. 532...................  Restricting the Use of  Rescind.
                                 an Auditor's Report.
AU sec. 534...................  Reporting on Financial  Not Included.
                                 Statements Prepared
                                 for Use in Other
                                 Countries.
AU sec. 543...................  Part of Audit           1205.
                                 Performed by Other
                                 Independent Auditors.
AU sec. 544...................  Lack of Conformity      3310.
                                 With Generally
                                 Accepted Accounting
                                 Principles.
AU sec. 550...................  Other Information in    2710.
                                 Documents Containing
                                 Audited Financial
                                 Statements.
AU sec. 552...................  Reporting on Condensed  3315.
                                 Financial Statements
                                 and Selected
                                 Financial Data.
AU sec. 558...................  Required Supplementary  2705.
                                 Information.
AU sec. 560...................  Subsequent Events.....  2801.
AU sec. 561...................  Subsequent Discovery    2905.
                                 of Facts Existing at
                                 the Date of the
                                 Auditor's Report.
AU sec. 623...................  Special Reports.......  3305.
AU sec. 625...................  Reports on the          6105.
                                 Application of
                                 Accounting Principles.
AU sec. 634...................  Letters for             6101.
                                 Underwriters and
                                 Certain Other
                                 Requesting Parties.
AU sec. 711...................  Filings Under Federal   4101.
                                 Securities Statutes.
AU sec. 722...................  Interim Financial       4105.
                                 Information.
AU sec. 801...................  Compliance Auditing     6110.
                                 Considerations in
                                 Audits of
                                 Governmental Entities
                                 and Recipients of
                                 Governmental
                                 Financial Assistance.
AU sec. 901...................  Public Warehouses--     Rescind.
                                 Controls and Auditing
                                 Procedures for Goods
                                 Held.
------------------------------------------------------------------------

Comparison of the Reorganization of PCAOB Auditing Standards to
Existing PCAOB Auditing Standards and the Standards of the
International Auditing and Assurance Standards Board and Auditing
Standards Board
    The following presents the adopted reorganization of PCAOB auditing
standards (``AS'') along with their references in existing PCAOB
auditing standards and the analogous standards of the International
Auditing and Assurance Standards Board (``IAASB'') and the Auditing
Standards Board of the American Institute of Certified Public
Accountants (``ASB'').
---------------------------------------------------------------------------

    \35\ The responsibilities, functions, training, and proficiency
of the independent auditor; independence requirements; exercising
due professional care; and audit risk are included in multiple PCAOB
standards (AS 1001, 1005, 1010, 1015, and 1101, respectively) but
are included in one IAASB standard (ISA 200) and one ASB standard
(AU-C 200).
    \36\ The relationship of auditing standards to quality control
standards, supervision of the audit engagement, and engagement
quality review are covered in separate PCAOB standards (AS 1110,
1201, and 1220, respectively) but are included in one IAASB standard
(ISA 220) and one ASB standard (AU-C 220).
    \37\ Under PCAOB standards, agreeing to the terms of an audit
and communications with audit committees are covered in one
standard, whereas those subjects are covered by separate standards
under IAASB standards (ISA 210 and 260, respectively) and ASB
standards (AU-C 210 and 260, respectively).
    \38\ The PCAOB has a standard for auditing internal control over
financial reporting when auditing financial statements. The IAASB
does not have a standard on auditing internal control over financial
reporting, and the ASB addresses that subject in its attestation
standards (AT 501).
    \39\ Under PCAOB standards, substantive analytical procedures
are covered in a separate standard (AS 2305) and analytical
procedures performed in the overall review are included in the
standard on evaluating audit results (AS 2810), whereas those
subjects are both included in one IAASB standard (ISA 520) and one
ASB standard (AU-C 520).
    \40\ The PCAOB has separate standards for auditing accounting
estimates (AS 2501) and auditing fair value measurements and
disclosures (AS 2502), whereas the IAASB and ASB standards each have
one standard on auditing accounting estimates including fair value
estimates and disclosures (ISA 540 and AU-C 540, respectively).
    \41\ The PCAOB has a separate standard for auditing derivative
instruments, hedging activities, and investments in securities (AS
2503). In ASB standards, that subject is included in the standard on
specific considerations regarding audit evidence (AU-C 501). The
IAASB has a practice note on auditing financial instruments but does
not have a standard on the subject.
    \42\ The PCAOB has a separate standard on inquiry of a client's
lawyers (AS 2505). In IAASB and ASB standards, inquiry of a client's
lawyers is included in the standard on specific considerations
regarding audit evidence (ISA 501 and AU-C 501, respectively).
    \43\ The PCAOB has a separate standard on auditing inventories
(AS 2510). In IAASB and ASB standards, auditing inventories is
included in the standard on specific considerations regarding audit
evidence (ISA 501 and AU-C 501, respectively).
    \44\ In PCAOB standards, the subjects of subsequent events and
subsequent discovery of facts existing at the report date are
covered by separate standards (AS 2801 and 2905, respectively). In
IAASB and ASB standards, those subjects are included in the standard
on subsequent events (ISA 560 and AU-C 560, respectively).
    \45\ In PCAOB standards, the subject of evaluating audit results
is covered in one standard (AS 2810). In IAASB and ASB standards,
various topics related to evaluating audit results are covered in
multiple standards, particularly, the standards related to the
auditor's responsibilities regarding fraud, the auditor's responses
to assessed risks, evaluation of misstatements, audit evidence, and
analytical procedures (ISA 240, 330, 450, 500, and 520 and AU-C 240,
330, 450, 500, and 520, respectively).
    \46\ The PCAOB has separate standards on the subjects of present
fairly in conformity with generally accepted accounting principles
(AS 2815) and reporting on audited financial statements, including
emphasis paragraphs, departures from the standard opinion, and
reporting on comparative statements (AS 3101). In IAASB and ASB
standards, the subject of presenting fairly is included in the
standard on forming an opinion and reporting on audited financial
statements (ISA 700 and AU-C 700, respectively), but there are
separate standards for emphasis paragraphs and departures from the
standard opinion (ISA 705 and 706, respectively, and AU-C 705 and
706, respectively). In IAASB standards, reporting on comparative
financial statements also is covered in a separate standard (ISA
710), whereas that subject is included in the ASB standard on
forming an opinion and reporting on audited financial statements
(AU-C 700).
    \47\ Under PCAOB standards, the subject of dating the
independent auditor's report is covered in a single standard (AS
3110). Under IAASB and ASB standards, the standard requirement for
dating the auditor's report is covered in the reporting standard
(ISA 700 and AU-C 700, respectively), and the subject of dating the
auditor's report when there is a subsequent discovery of facts is
covered in the subsequent events standard (ISA 560 and AU-C 560,
respectively).
    \48\ Under PCAOB standards, financial statements prepared in
accordance with special purpose frameworks and reporting on
specified elements, accounts or items of a financial statement are
covered in one standard (AS 3305). Under IAASB and ASB standards,
those subjects are covered by separate standards (ISA 800 and 805,
respectively) and ASB standards (AU-C 800 and 805, respectively).
Reporting on compliance with contractual agreements or regulatory
requirements in connection with audited financial statements also is
covered by the PCAOB standard, whereas that subject is not covered
by the IAASB standards and is covered by a separate ASB standard
(AU-C 806).
    \49\ Under PCAOB standards, the subject of reporting on
financial statements prepared in accordance with a regulatory basis
of accounting is covered in a separate standard (AS 3310). That
subject is covered in the IAASB standard on agreeing to the terms of
audit engagements (ISA 210) and in the ASB standard on financial
statements prepared in accordance with special purpose frameworks
(AU-C 800).
    \50\ In PCAOB standards, the subject of conducting a review of
interim financial information is covered in AS 4105. Under IAASB
standards, that subject is covered in their review standards
(International Standard on Review Engagements 2410). Reviewing
interim financial information is covered by the ASB standards in AU-
C 930.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Analogous IAASB standard
     AS reference              Title             PCAOB reference (AU section or AS No.)                 (ISA)              Analogous ASB standard (AU-C)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1001.................  Responsibilities and  AU sec. 110..................................  200 \35\.....................  200.
                        Functions of the
                        Independent Auditor.
1005.................  Independence........  AU sec. 220..................................  200..........................  200.
1010.................  Training and          AU sec. 210..................................  200..........................  200.
                        Proficiency of the
                        Independent Auditor.
1015.................  Due Professional      AU sec. 230..................................  200..........................  200.
                        Care in the
                        Performance of Work.
1101.................  Audit Risk..........  AS No. 8.....................................  200..........................  200.
1105.................  Audit Evidence......  AS No. 15....................................  500..........................  500.
1110.................  Relationship of       AU sec. 161..................................  220 \36\.....................  220.
                        Auditing Standards
                        to Quality Control
                        Standards.
1201.................  Supervision of the    AS No. 10....................................  220..........................  220.
                        Audit Engagement.
1205.................  Part of the Audit     AU sec. 543..................................  600..........................  600.
                        Performed by Other
                        Independent
                        Auditors.
1210.................  Using the Work of a   AU sec. 336..................................  500, 620.....................  500, 620.
                        Specialist.
1215.................  Audit Documentation.  AS No. 3.....................................  230..........................  230.
1220.................  Engagement Quality    AS No. 7.....................................  220..........................  220.
                        Review.
1301.................  Communications with   AS No. 16....................................  210, 260 \37\................  210, 260.
                        Audit Committees.
1305.................  Communications About  AU sec. 325..................................  265..........................  265.
                        Control
                        Deficiencies in an
                        Audit of Financial
                        Statements.
2101.................  Audit Planning......  AS No. 9.....................................  300..........................  300.
2105.................  Consideration of      AS No. 11....................................  320..........................  320.
                        Materiality in
                        Planning and
                        Performing an Audit.
2110.................  Identifying and       AS No. 12....................................  315..........................  315.
                        Assessing Risks of
                        Material
                        Misstatement.
2201.................  An Audit of Internal  AS No. 5.....................................  N/A \38\.....................  AT 501.
                        Control Over
                        Financial Reporting
                        That Is Integrated
                        with An Audit of
                        Financial
                        Statements.
2301.................  The Auditor's         AS No. 13....................................  330..........................  330.
                        Responses to the
                        Risks of Material
                        Misstatement.
2305.................  Substantive           AU sec. 329..................................  520 \39\.....................  520.
                        Analytical
                        Procedures.
2310.................  The Confirmation      AU sec. 330..................................  505..........................  505.
                        Process.
2315.................  Audit Sampling......  AU sec. 350..................................  530..........................  530.
2401.................  Consideration of      AU sec. 316..................................  240..........................  240.
                        Fraud in a
                        Financial Statement
                        Audit.
2405.................  Illegal Acts by       AU sec. 317..................................  250..........................  250.
                        Clients.
2410.................  Related Parties.....  AS No. 18....................................  550..........................  550.
2415.................  Consideration of an   AU sec. 341..................................  570..........................  570.
                        Entity's Ability to
                        Continue as a Going
                        Concern.
2501.................  Auditing Accounting   AU sec. 342..................................  540 \40\.....................  540.
                        Estimates.
2502.................  Auditing Fair Value   AU sec. 328..................................  540..........................  540.
                        Measurements and
                        Disclosures.
2503.................  Auditing Derivative   AU sec. 332..................................  N/A \41\.....................  501.
                        Instruments,
                        Hedging Activities,
                        and Investments in
                        Securities.
2505.................  Inquiry of a          AU sec. 337..................................  501 \42\.....................  501.
                        Client's Lawyer
                        Concerning
                        Litigation, Claims,
                        and Assessments.
2510.................  Auditing Inventories  AU sec. 331..................................  501 \43\.....................  501.
2601.................  Consideration of an   AU sec. 324..................................  402..........................  402.
                        Entity's Use of a
                        Service
                        Organization.
2605.................  Consideration of the  AU sec. 322..................................  610..........................  610.
                        Internal Audit
                        Function.
2610.................  Initial Audits--      AU sec. 315..................................  510..........................  510.
                        Communications
                        Between Predecessor
                        and Successor
                        Auditors.
2701.................  Auditing              AS No. 17....................................  N/A..........................  725.
                        Supplemental
                        Information
                        Accompanying
                        Audited Financial
                        Statements.
2705.................  Required              AU sec. 558..................................  N/A..........................  730.
                        Supplementary
                        Information.
2710.................  Other Information in  AU sec. 550..................................  720..........................  720.
                        Documents
                        Containing Audited
                        Financial
                        Statements.
2801.................  Subsequent Events...  AU sec. 560..................................  560 \44\.....................  560.
2805.................  Management            AU sec. 333..................................  580..........................  580.
                        Representations.

2810.................  Evaluating Audit      AS No. 14....................................  240, 330, 450, 500, 520 \45\.  240, 330, 450, 500, 520.
                        Results.
2815.................  The Meaning of        AU sec. 411..................................  700 \46\.....................  700.
                        ``Present Fairly in
                        Conformity with
                        Generally Accepted
                        Accounting
                        Principles``.
2820.................  Evaluating            AS No. 6.....................................  N/A..........................  708.
                        Consistency of
                        Financial
                        Statements.
2901.................  Consideration of      AU sec. 390..................................  N/A..........................  585.
                        Omitted Procedures
                        After the Report
                        Date.
2905.................  Subsequent Discovery  AU sec. 561..................................  560..........................  560.
                        of Facts Existing
                        at the Date of the
                        Auditor's Report.
3101.................  Reports on Audited    AU sec. 508..................................  700, 705, 706, 710...........  700, 705, 706.
                        Financial
                        Statements.
3110.................  Dating of the         AU sec. 530..................................  560, 700 \47\................  560, 700.
                        Independent
                        Auditor's Report.
3305.................  Special Reports.....  AU sec. 623..................................  800, 805 \48\................  800, 805, 806.
3310.................  Special Reports on    AU sec. 544..................................  210 \49\.....................  800.
                        Regulated Companies.
3315.................  Reporting on          AU sec. 552..................................  810..........................  810.
                        Condensed Financial
                        Statements and
                        Selected Financial
                        Data.
3320.................  Association with      AU sec. 504..................................  N/A..........................  Withdrawn by ASB.
                        Financial
                        Statements.
4101.................  Responsibilities      AU sec. 711..................................  N/A..........................  925.
                        Regarding Filings
                        Under Federal
                        Securities Statutes.
4105.................  Reviews of Interim    AU sec. 722..................................  ISRE 2410 \50\...............  930.
                        Financial
                        Information.
6101.................  Letters for           AU sec. 634..................................  N/A..........................  920.
                        Underwriters and
                        Certain Other
                        Requesting Parties.
6105.................  Reports on the        AU sec. 625..................................  N/A..........................  915.
                        Application of
                        Accounting
                        Principles.
6110.................  Compliance Auditing   AU sec. 801..................................  N/A..........................  935.
                        Considerations in
                        Audits of
                        Recipients of
                        Governmental
                        Financial
                        Assistance.
6115.................  Reporting on Whether  AS No. 4.....................................  N/A..........................  N/A.
                        a Previously
                        Reported Material
                        Weakness Continues
                        to Exist.
--------------------------------------------------------------------------------------------------------------------------------------------------------

(b) Statutory Basis
    The statutory basis for the proposed rules is Title I of the Act.

B. Board's Statement on Burden on Competition

    Not applicable. The Board's consideration of the economic impacts
of the proposed rules is discussed in section D.

C. Board's Statement on Comments on the Proposed Rules Received From
Members, Participants or Others

    The Board initially released the proposed rules for public comment
on March 26, 2013, in PCAOB Release No. 2013-002. The original proposal
was discussed with members of the academic community at the PCAOB's
Academic Conference on April 26, 2013 and with the PCAOB's Standing
Advisory Group (``SAG'') on May 15, 2013. The Board received 19 comment
letters on the original proposal.
    On May 7, 2014, the Board released a supplemental request for
comment on the proposed reorganization in PCAOB Release No. 2014-001.
In conjunction with issuing the supplemental request, the Board also
released on its website a demonstration version of the reorganized
auditing standards to facilitate review and comment on the proposed
amendments. The online demonstration version presented the existing
auditing standards as they would look if reorganized according to the
proposed amendments included in the supplemental request. The Board
received 7 comment letters on the supplemental request.
    The Board has carefully considered all comments received. The
Board's response to the comments it received and the changes made to
the rules in response to the comments received are discussed below.
Comments on the Proposed Approach for Reorganizing PCAOB Auditing
Standards
    Commenters generally supported the proposed reorganization of PCAOB
auditing standards. Commenters that supported the Board's use of a
distinguishable organizational structure generally supported the
category and subcategory approach to reorganizing the auditing
standards and the use of a four-digit numbering system.
    The Board has made certain refinements to the reorganization that
are consistent with comments received. Those changes include: Moving
the subcategory ``Auditing Internal Control Over Financial Reporting''
and its related standard to follow the subcategory ``Audit Planning and
Risk Assessment''; \51\ moving Auditing Standard No. 4, Reporting on
Whether a Previously Reported Material Weakness Continues to Exist, to
the ``Other Matters Associated with Audits'' category; \52\ changing
the title of existing standard AU sec. 331, Inventories, to ``Auditing
Inventories''; \53\ and expanding the numbering interval between
standards to allow more flexibility for future standard setting.\54\
---------------------------------------------------------------------------

    \51\ The illustration of the reorganized auditing standards
presented above reflects the movement of the subcategory ``Auditing
Internal Control Over Financial Reporting'' and its related standard
after the subcategory ``Audit Planning and Risk Assessment.''
    \52\ The illustration of the reorganized auditing standards
presented above reflects the amendments to move this standard to the
category ``Other Matters Associated with Audits.''
    \53\ In addition to this name change, the illustration of the
reorganized auditing standards presented above reflects the
amendments to change the auditing standard titles to make them more
consistent in style with other standards or to clarify the subject
of the standard. These changes include: (i) Renaming subcategory
2700 as ``Auditor's Responsibilities Regarding Supplemental and
Other Information'' (from ``Auditor's Responsibilities Regarding
Supplementary and Other Information'') to be consistent with the
title of AS 2701, Auditing Supplemental Information Accompanying
Audited Financial Statements, and (ii) changing the reference number
of AS 3105, Dating of the Independent Auditor's Report, to AS 3110
to make room if the proposed auditing standard, The Auditor's Report
on an Audit of Financial Statements When the Auditor Expresses an
Unqualified Opinion, is adopted by the Board.
    \54\ The supplemental request included a refinement to generally
expand the numbering interval within the subcategories from a four-
digit number structure using consecutive numbering to using
increments of five. This change allows for more flexibility for
future standards. However, the amendments do not change the
intervals between AS 2501, Auditing Accounting Estimates, AS 2502,
Auditing Fair Value Measurements and Disclosures, and AS 2503,
Auditing Derivative Instruments, Hedging Activities, and Investments
in Securities, as the Board has a standard-setting project that is,
among other things, considering a combined standard to include the
topics addressed by these standards. As part of that project, the
Board will decide which topics, if any, to combine, which topics
will be maintained as separate standards, and whether the numbering
of these standards should be modified.

---------------------------------------------------------------------------

    Some commenters suggested other changes to certain categories and
subcategories. For example, some commenters suggested renaming
subcategory 2200 ``Audit Procedures in Response to Risks--Nature,
Timing, and Extent'' as ``Audit Evidence'' and eliminating
subcategories 2300 (``Audit Procedures for Specific Aspects of the
Audit'') and 2400 (``Audit Procedures for Certain Accounts or
Disclosures''). Those commenters also suggested moving the auditing
standards under those subcategories into the retitled subcategory
because such standards relate to obtaining audit evidence. However,
those commenters did not suggest moving other standards that also
involve obtaining audit evidence, such as the standard on identifying
and assessing risks. Revising the titles of certain categories and
subcategories to be more general, thereby encompassing more standards,
would make the reorganized standards more difficult to navigate and
would not follow the audit process as closely as the proposed
reorganization. Therefore these changes were not made.
    The Board also received comments that suggested moving individual
standards to different categories. Some commenters suggested moving AU
sec. 336, Using the Work of a Specialist, and AU sec. 543, Part of
Audit Performed by Other Independent Auditors, from the ``General
Auditing Standards'' category to the ``Audit Procedures'' category as
these standards include specific auditing procedures. Another commenter
suggested keeping these standards within the general category but
moving them into a new subcategory titled ``Using the Work of Others.''
These changes were not made. These standards were intentionally placed
near Auditing Standard No. 10, Supervision of the Audit Engagement,
because, in certain situations, other auditors and auditors'
specialists already are required to be supervised pursuant to that
supervision standard. Also, some commenters suggested moving one or
more of the following standards from the ``Audit Procedures'' category
to the ``Auditor Reporting'' category as these standards include
aspects related to reporting on the financial statements: (i) Auditing
Standard No. 17, Auditing Supplemental Information Accompanying Audited
Financial Statements; (ii) AU sec. 558, Required Supplementary
Information; and (iii) Auditing Standard No. 6, Evaluating Consistency
of Financial Statements. However, moving these standards to the
reporting section of the reorganization might lead auditors to overlook
performance requirements in those standards. Thus, those three
standards remain in the ``Audit Procedures'' category.
Comments on Rescinding Certain Interim Auditing Standards
    Some commenters suggested retaining AU sec. 532, noting that
auditors sometimes need to restrict the use of their reports, and
expressed a concern that rescinding AU sec. 532 might be perceived as
precluding auditors from restricting the use of those reports. The
commenters cited examples of specific situations in which the use of
audit reports should be restricted and indicated that auditors look to
AU sec. 532 for the applicable reporting language. The Board observed
that the examples cited by the commenters related to situations that
were already addressed by other PCAOB standards or rules.\55\
Accordingly, retaining AU sec. 532 is unnecessary in those situations.
---------------------------------------------------------------------------

    \55\ Specifically, commenters cited situations covered by AU
sec. 325, Communications About Control Deficiencies in an Audit of
Financial Statements, and AU sec. 623, Special Reports, which
address use restrictions in those situations. One commenter
identified PCAOB Rule 3524, Audit Committee Pre-approval of Certain
Tax Services, Rule 3525, Audit Committee Pre-approval of Non-audit
Services Related to Internal Control Over Financial Reporting, and
Rule 3526, Communication with Audit Committees Concerning
Independence. That commenter acknowledged, however, that those
communications are not reports that are covered by AU sec. 532,
which applies to audit reports that are the ``by-product'' of an
audit.
---------------------------------------------------------------------------

    Commenters also cited Auditing Standard No. 16, Communications with
Audit Committees, but that standard, by its terms, does not require the
auditor to restrict the use of audit committee communications. Since
the comments received did not identify a specific need for retaining AU
sec. 532, the Board asked in the supplemental request for examples of
situations that support keeping this standard.
    Some commenters also raised questions regarding restricting the use
of audit committee communications under Auditing Standard No. 16.
Specifically, commenters observed that footnote 41 of Auditing Standard
No. 16 cites AU sec. 532 and that AU sec. 532, as amended, lists audit
committee communications pursuant to Auditing Standard No. 16 as ``by-
product'' reports whose use should be restricted.\56\ However, even in
the absence of AU sec. 532, nothing precludes auditors from restricting
the use of communications to audit committees under Auditing Standard
No. 16.\57\ Therefore, the Board is rescinding AU sec. 532 as proposed.
---------------------------------------------------------------------------

    \56\ See paragraphs .07 and .11 of AU sec. 532. AU sec. 532.07
also listed reports issued pursuant to AU sec. 325 and AU sec. 623
as by-product reports.
    \57\ If an auditor decides to restrict the use of certain
reports to a company's audit committee, he or she may consider the
direction provided by other standards that address restricting the
use of reports, such as AS 1305.06 (formerly AU sec. 325.6). That
standard requires that the auditor's written communication to the
audit committee include a statement that the communication is
intended solely for the information and use of the board of
directors, audit committee, management, and others within the
organization. It further provides that when there are requirements
established by governmental authorities to furnish such written
communications, specific reference to such regulatory authorities
may be made.
---------------------------------------------------------------------------

    The Board also received comments about retaining or rescinding
other interim auditing standards. One commenter suggested retaining AU
sec. 901 and combining it with AU sec. 331, Inventories. As discussed
in the original proposal, AU sec. 901 reports the conclusions of a 1966
study of the AICPA Committee on Auditing Procedure on the
accountability of warehousemen for goods stored in public warehouses.
AU sec. 901 is unnecessary because the specific auditing requirements
regarding inventory held in public warehouses are set forth in AU sec.
331. Therefore, the Board is rescinding this standard as proposed.
    A commenter suggested rescinding AU sec. 625, Reports on the
Application of Accounting Principles, AU sec. 801, Compliance Auditing
Considerations in Audits of Governmental Entities and Recipients of
Governmental Financial Assistance, and AU sec. 544, Lack of Conformity
with Generally Accepted Accounting Principles. Another commenter
expressed support for retaining AU sec. 625. The Board is not
rescinding these standards at this time because they cover situations
that may be related to audits of issuers.
Comments on Interpretive Publications
    Some commenters suggested that the PCAOB retain the practice of
presenting interpretations with the related auditing standards along
with adding other Board-issued guidance. Another commenter suggested a
numbering convention analogous to the existing auditing
interpretations, specifically, using a ``9'' prefix before the standard
number. The Board is adopting the

organizational structure and numbering of the auditing interpretations
as proposed. It is important to distinguish standards from auditing
interpretations and guidance because, among other reasons, an auditor's
responsibility related to auditing standards differs from the auditor's
responsibility regarding auditing interpretations and other
interpretive publications. The Board is also adopting the numbering
convention as presented in the supplemental request. The titles of the
interpretations (along with the hyperlinks) identify the corresponding
standards, which should help auditors and other users associate the
interpretations with their related standards. The Board will continue
to assess the need to update the guidance in the auditing
interpretations.
    The Board proposed to remove from PCAOB auditing standards
references to AICPA Audit and Accounting Guides and AICPA auditing
Statements of Position. Commenters responded that auditors historically
have used audit and accounting guides in their audits of companies in
specialized industries, and they offered a variety of suggestions about
how the Board should treat them, such as retaining the existing
references in PCAOB standards, acknowledging the usefulness of current
editions of the guides, or replacing them with the Board's own
specialized industry guidance.
    The Board is adopting the amendments to remove references to AICPA
Audit and Accounting Guides and AICPA auditing Statements of Position
because the guides referenced in PCAOB standards are outdated.\58\
While auditors might consider more recent editions of audit and
accounting guides or other materials to be useful reference materials--
for example, for information about specialized industries--the
auditor's responsibility is to comply with PCAOB auditing and related
professional practice standards. In connection with its oversight
activities, the PCAOB will continue to consider developing guidance on
the application of PCAOB standards when the need arises.
---------------------------------------------------------------------------

    \58\ AICPA Audit and Accounting Guides and auditing Statements
of Position referenced in PCAOB standards are the editions of those
publications as in existence on April 16, 2003.
---------------------------------------------------------------------------

Comments on Amendments to Illustrative Auditor's Reports
    As described above, the Board proposed amendments to update the
illustrative auditor's reports within the interim standards with the
requirements in Auditing Standard No. 1 and thus supersede the
respective auditing standard. Although the Board received no comments
on its proposal to supersede Auditing Standard No. 1, one commenter
suggested that the title of illustrative auditor's reports in the
PCAOB's standards also be revised to reflect the title used in Auditing
Standard No. 1's illustrative reports (that is, change the title of the
illustrative reports to ``Report of Independent Registered Public
Accounting Firm''). The Board is adopting the amendments and
superseding Auditing Standard No. 1 as proposed and, as suggested, is
adding amendments to change the title of illustrated reports included
in the standards. The amendments do not change the requirements for the
content of the auditor's report.\59\
---------------------------------------------------------------------------

    \59\ For example, the amendments would not preclude an
unregistered firm that applies PCAOB standards from omitting
``Registered'' from the title of its report.
---------------------------------------------------------------------------

Comments on Amendments To Remove References to Superseded Standards
    As discussed above, the Board received comments on its amendments
to remove references to a superseded auditing standard and auditing
interpretation in interpretation 4 of AT sec. 9101, which includes
illustrative letters to regulators when they request access to or
copies of attestation documentation. Commenters indicated that the
proposed amendments caused the interpretation to lack context because
the amendments removed the introductory paragraphs to the illustrative
letters. Therefore, the amendments as adopted by the Board include a
paragraph that introduces the illustrative letters while eliminating
the superseded references.
Comments on the Effective Date
    The original proposal requested commenters to provide factors the
Board should consider in determining the effective date. Factors
provided by commenters, among other things, included providing
sufficient time for firms to update their methodologies, reference
materials, and practice aids and to train staff. One commenter, an
accounting firm, also suggested using a single transition date as
opposed to a date dependent on the year end of an issuer, broker, or
dealer as from that firm's perspective a single date would facilitate a
more efficient transition to the reorganization.
    After considering the comments received and the timing of the
adoption of the reorganization, the Board has determined that the
accompanying reorganization and related amendments will be effective,
subject to SEC approval, as of December 31, 2016. If the adopted
amendments accompanying this release are approved by the SEC, nothing
precludes auditors and others from using and referencing the
reorganized standards before the effective date, as the amendments do
not substantively change the standards' requirements.
Other Comments
    The Board received other comments that are not directly related to
the amendments. Some comments generally related to possible other
enhancements to the Board's standards or the presentation of standards
on the PCAOB website, in many cases consistent with potential
enhancements discussed in the original proposal and supplemental
request. In general, these suggested enhancements involved:
     Updating outdated references to generally accepted
accounting principles (``GAAP'') within the auditing standards;
     Reorganizing PCAOB guidance into an integrated topical
structure;
     Adding links on the website from the auditing standards to
related guidance; and
     Adding features to the Board's standards on the website,
such as converting cross-references into hyperlinks.
    The Board plans to address GAAP references in its standards in the
context of future standard-setting activities because updating these
references could involve substantive changes to the auditing standards
that are outside the near-term scope of this project. Also, the Board
plans to consider ways to enhance the usability of PCAOB guidance.
Additionally, the Board continues to consider opportunities for
improving its website.\60\
---------------------------------------------------------------------------

    \60\ The Board updates its website to reflect changes to the
Board rules and standards that are approved by the SEC. Accordingly,
if the amendments are approved by the SEC, the PCAOB would update
its website to reflect the auditing standards as reorganized.
---------------------------------------------------------------------------

    The Board also received comments advocating other actions besides
reorganizing PCAOB auditing standards as described in the original
proposal. For example, some of those commenters suggested full
convergence with the IAASB or ASB standards or adopting the standards
of the IAASB or ASB and adding incremental requirements for the auditor
to perform when conducting an audit of an issuer. As the Board has
explained previously:

    [B]ecause the Board's standards must be consistent with the
Board's statutory mandate, differences will continue to exist

between the Board's standards and the standards of the IAASB and ASB
e.g., when the Board decides to retain an existing requirement in
PCAOB standards that is not included in IAASB or ASB standards.
Also, certain differences are often necessary for the Board's
standards to be consistent with relevant provisions of the federal
securities laws or other existing standards or rules of the Board.
Also, the Board's standards-setting activities are informed by and
developed to some degree, in response to observations from its
oversight activities.\61\
---------------------------------------------------------------------------

    \61\ See PCAOB Release 2010-004, at A10-91-A10-92.
---------------------------------------------------------------------------

    Nevertheless, the PCAOB continues to consider carefully the work of
the IAASB and ASB in PCAOB standard-setting projects. Additionally, the
Board will consider the organization and content of individual
standards during the course of future standard-setting projects.
    For a discussion on comments received on the cost and benefits of
the reorganization, see section D.

D. Economic Considerations and Application to Audits of Emerging Growth
Companies

    This section discusses economic considerations related to the
reorganization, specifically, the need for rulemaking, alternatives
considered, description of the baseline, and consideration of benefits
and costs. It also discusses considerations related to audits of EGCs
and audits of brokers and dealers.
Need for Rulemaking
    As discussed in more detail in section A, the reorganization
creates a standardized organizational structure of PCAOB auditing
standards to enhance the usability of the standards, including helping
users navigate the standards more easily. This could help auditors, for
example, find more easily the relevant requirements in PCAOB standards
for a particular area of the audit, which could facilitate compliance
with PCAOB standards.
    The reorganization also could help avoid potential confusion
between the Board's standards and the recently reorganized standards of
the ASB, if the same AU section reference was used for different
standards covering different topics.
    In addition, the reorganization would provide a structure for
updating PCAOB standards in the future.
    Commenters generally supported the reorganization of PCAOB auditing
standards.
Consideration of Alternatives
    In the original proposal, the Board outlined three alternatives to
the proposed approach \62\ for reorganizing the standards:
---------------------------------------------------------------------------

    \62\ The Board proposed the approach described in section A
because it addresses more fully the reasons for the reorganization.
---------------------------------------------------------------------------

    1. Continue issuing sequentially numbered standards until all of
the interim standards are replaced;
    2. Retain the organizational structure of the existing interim
standards and assign section numbers to Board-issued standards that
would fit into the existing organizational structure; or
    3. Adopt the organizational structure of another auditing standard
setter, such as the IAASB.
    The first alternative would eventually result in a single structure
and would avoid the potential confusion between PCAOB auditing
standards and the standards of other standard setters. However, this
alternative would take years for users to receive its benefits, and,
under this approach, the standards would be more difficult to navigate
than a topical system.
    The second alternative would provide little benefit to users
because it has few categories and is less intuitive than an organized
structure that follows the flow of the audit process. In addition, as
the ASB continues to use a three-digit system to reference its
standards, the potential for confusion between the standards of the
Board and the standards of the AICPA, as previously discussed in
section A, would remain.
    The third alternative could be confusing to users if PCAOB
standards and IAASB standards used the same section numbers for
standards that address different topics. Similar issues would arise if
the PCAOB adopted the organizational structure of the clarified ASB
standards.
    Other commenters suggested that the PCAOB collaborate with other
standard setters to develop a unified framework for auditing standards
or to develop a codification of the auditing standards in a manner
similar to the approach taken by the FASB with its accounting
standards.\63\ Another commenter suggested that the Board limit time
spent on this project and instead focus its efforts on other matters on
the Board's standard-setting agenda. The Board's reorganization of the
auditing standards provides immediate benefits to users, such as making
standards easier to navigate and establishing a structure for future
updates of the standards. Thus, the Board decided to proceed with this
project.
---------------------------------------------------------------------------

    \63\ For example, this approach might apply an Area, Topic,
Subtopic, and Section structure.
---------------------------------------------------------------------------

    As previously discussed, the majority of commenters were in favor
of the Board using a distinguishable organizational structure. Those
commenters supported the organization as proposed or offered
suggestions to the proposed reorganization such as changes to the
titles, categorization, or sequence of existing standards and guidance.
The Board has made some refinements to the organizational structure and
amendments presented in the original proposal and supplemental request,
as discussed above.
Baseline
    The existing organizational structure of PCAOB auditing standards
is described in section A as consisting of sequentially numbered AS
standards and AU sections representing the remaining interim standards
that the Board has not superseded. The Board believes this current
organizational structure is generally reflected in references made in
firm methodologies, commercially published guidance, and other
technology tools, and therefore constitutes the baseline against which
impacts can be considered.
Consideration of Benefits and Costs
    The reorganization of PCAOB auditing standards involves amendments
that do not impose additional requirements on auditors or substantively
change the requirements of PCAOB standards. Thus, the reorganization is
not expected to affect the manner in which audits are performed and
reported under PCAOB standards.
    As discussed previously, benefits of the reorganization stem from a
single, integrated organizational structure for PCAOB auditing
standards that is easier for auditors and others to use. Among other
things, this could help auditors find more easily the relevant
requirements in PCAOB standards for a particular area of the audit,
which could facilitate compliance with PCAOB standards. It also could
help avoid the potential for confusion between PCAOB standards and ASB
standards.
    As discussed in the original proposal, the primary incremental
costs of the changes related to the reorganization would be costs to
registered firms of updating references within firm methodologies,
related reference materials, and practice aids to reflect the new
citations to PCAOB auditing standards, as well as training on the new
organizational structure. The adopted reorganization is likely to have
less cost than approaches suggested by some commenters--for example, a
unified framework or FASB-like codification--that would involve
substantial redrafting of PCAOB

auditing standards and therefore the potential for more extensive
modifications to registered firms' methodologies and related materials.
    Comments on potential benefits and costs of the proposal generally
were consistent with these views. Commenters who advocated using the
IAASB or ASB organizational structure or working with other standard
setters to develop a unified organizational structure cited additional
costs associated with supporting compliance with two different sets of
auditing standards. However, the costs cited by the commenters stem
principally from differences in the standards themselves rather than
how they are organized. Furthermore, the reorganization involves
changing the titles, categorization, or sequence of existing standards
and guidance; it does not create a new set of auditing standards. In
addition, reorganizing the standards to make them easier to navigate
should help users of the standards compare PCAOB standards to IAASB and
ASB standards.
Application to Audits of Emerging Growth Companies
    The Board does not anticipate that the preceding economic
considerations would be different for audits of EGCs, as defined by the
Jumpstart Our Business Startups Act of 2012 (``JOBS Act'').\64\
Pursuant to Section 104 of the JOBS Act, any rules adopted by the Board
subsequent to April 5, 2012, do not apply to the audits of EGCs (as
defined in Section 3(a)(80) of the Exchange Act) unless the SEC
``determines that the application of such additional requirements is
necessary or appropriate in the public interest, after considering the
protection of investors and whether the action will promote efficiency,
competition, and capital formation.'' \65\
---------------------------------------------------------------------------

    \64\ See Section 101 of the JOBS Act. As of September 30, 2014,
based on the PCAOB's research, 1,726 SEC registrants have identified
themselves as EGCs in SEC filings. These companies operate in
diverse industries with Standard Industrial Classification codes
such as pharmaceutical preparations, blank checks, real estate
investment trusts, prepackaged software services, business services,
metal mining, and computer processing/data preparations services.
For EGCs in which audited financial statements were available, those
companies reported assets ranging from zero to approximately $13.0
billion, with an average and median of $199.0 million and
approximately $2.4 million, respectively. The companies reported
revenue ranging from zero to approximately $993.5 million, with an
average and median of $59.8 million and $21 thousand, respectively.
Approximately 44 percent of the companies were audited by accounting
firms that issued audit reports for more than 100 public company
audit clients, and the remainder of the companies were audited by
firms that issued audit reports for 100 or fewer public company
audit clients.
    \65\ See JOBS Act, Public Law 112-106, Sec.  104.
---------------------------------------------------------------------------

    As discussed previously, the reorganization of PCAOB auditing
standards would involve amendments that do not impose additional
requirements on auditors or change substantively the requirements of
PCAOB standards. Thus, the reorganization, including the amendments, is
not expected to affect the manner in which audits are performed and
reported under PCAOB standards, including audits of EGCs. The Board
sought comment on the effect, if any, the reorganization would have
specifically on audits of EGCs. Commenters indicated that they were not
aware of any costs that would be specific to audits of EGCs when
compared to costs of non-EGC audits.
    Accordingly and pursuant to the above discussion, the PCAOB
requests that the Commission determine that it is necessary or
appropriate in the public interest, after considering the protection of
investors and whether the action will promote efficiency, competition,
and capital formation, to apply these amendments to audits of EGCs.
Audits of Brokers and Dealers
    Section 982 of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (``Dodd-Frank Act'') \66\ expanded the authority of the
Board to oversee the audits of brokers and dealers that are required
under SEC rules. On July 30, 2013, the SEC amended its rules, including
SEC Rule 17a-5 under the Exchange Act, to require, among other things,
that audits of brokers' and dealers' financial statements and
examinations of reports regarding compliance with SEC requirements be
performed in accordance with the standards of the PCAOB, effective for
fiscal years ending on or after June 1, 2014.\67\ Commenters agreed
with the Board's view that the reorganization is appropriate for all
audits, including audits of brokers and dealers.
---------------------------------------------------------------------------

    \66\ Public Law 111-203, 124 Stat. 1376 (July 21, 2010).
    \67\ See SEC, Broker-Dealer Reports, Securities Exchange Act of
1934 Release No. 70073 (July 30, 2013), 78 Federal Register 51910
(August 21, 2013), which includes the final rules.
---------------------------------------------------------------------------

III. Date of Effectiveness of the Proposed Rules and Timing for
Commission Action

    Pursuant to Section 19(b)(2)(A)(ii) of the Exchange Act, and based
on its determination that an extension of the period set forth in
Section 19(b)(2)(A)(i) of the Exchange Act is appropriate in light of
the PCAOB's request that the Commission, pursuant to Section
103(a)(3)(C) of the Sarbanes-Oxley Act, determine that the proposed
rules apply to audits of emerging growth companies, as defined in
Section 3(a)(80) of the Exchange Act, the Commission has determined to
extend to September 23, 2015 the date by which the Commission should
take action on the proposed rules.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed
rules are consistent with the requirements of Title I of the Act.
Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/pcaob.shtml); or
     Send an e-mail to<EMAIL_ADDRESS>Please include
File Number PCAOB-2015-01 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE,
Washington, DC 20549-1090.

All submissions should refer to File Number PCAOB-2015-01. This file
number should be included on the subject line if e-mail is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet website (http://www.sec.gov/rules/pcaob.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rules that are filed
with the Commission, and all written communications relating to the
proposed rules between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE., Washington,
DC 20549-1090, on official business days between the hours of 10:00
a.m. and 3:00 p.m. Copies of such filing will also be available for
inspection and copying at the principal office of the PCAOB. All
comments received will be posted without change; we do not edit
personal identifying information from submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to File Number PCAOB-2015-01 and should be
submitted on or before July 16, 2015.

    For the Commission, by the Office of the Chief Accountant, by
delegated authority.\68\
---------------------------------------------------------------------------

    \68\ 17 CFR 200.30-11(b)(2).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-15571 Filed 6-24-15; 8:45 am]
BILLING CODE 8011-01-P