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The AAO Weblog covers accounting issues and current events as they relate the practice of investment analysis. All posts prior to September, 2007 are in the public domain, but after September 4, only subscribers to The Analyst's Accounting Observer will see all posts going forward. Only selected, occasional posts will be released to the public domain from September 4 forward.

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December 19: The AS 2 Lite Process Begins
Location: BlogsAAO Weblog (Public)    
Posted by: Jack Ciesielski 12/6/2006 7:47 AM
The PCAOB issued this press release yesterday, announcing that on December 19 they'll hold an open meeting "to consider proposing for public comment a new auditing standard to supersede" the existing Auditing Standard 2.

Their intentions for the new, improved AS 2: strip it down so that unnecessary work doesn't get done, while preserving the spirit of the original. To do that, they'll have to make things more judgment-and-principles-based, I think. At the same time they intend to provide "guidance on efficiency" and "explicit and practical guidance on scaling the audit to fit the size and complexity of the company" - all the right buttons to push to silence critics, for sure.

If they can pull it off, it'll be a neat trick. When I hear the word "guidance," however, my rule-o-meter needle starts swinging towards the right. Requests for guidance usually mean "tell me in print something with which I can comply, so I don't have to go out on a limb." And that is exactly how we've come to build such a thicket of accounting rules. The PCAOB's critics are asking for relief and they're asking for rules, too - and you can't have both. It'll be an interesting process to watch.
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