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The AAO Weblog covers accounting issues and current events as they relate the practice of investment analysis.

Dec 6

Written 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.