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US auditing standards risk being isolated if they continue to ignore the international developments in accounting standards based on international financial reporting standards (IFRS). The Public Company Accounting Oversight Board (PCAOB)'s Bill Gradison, said that there was a risk that the USA could become the only country using an audit reporting standard that was not based on IFRS.
Gradison spoke at an accounting conference on Friday and said "Unless PCAOB modifies the format of its standards writing, it may, in two years' time, be the only standards writer not to use international standards as a base" and he called for the PCAOB to take this up as a priority issue.
The PCAOB, created to impose Sarbanes-Oxley requirements on US audit reporting standards for publically quoted companies, works to the US Generally Accepted Accounting Principles (GAAP) and obliges independent auditors to report according to these standards. However there is pressure from both inside and outside the US to move to a version of the standards compatible with those of the International Auditing and Assurance Standards Board (IAASB), the guardian of IFRS standards. The Financial Accounting Standards Board has committed to move to an internationally-accepted standard, and earlier this year an agreement was made by the SEC to allow foreign companies who issue US shares to submit their regulatory filings using IFRS reporting standards without reconciling them to the US’s GAAP, as was previously the case.
The American Institute of Certified Public Accountants (AICPA), the body that imposes standards for private company reporting in the USA, is also working on revisiting its standards to align them with IFRS.
Is this the demise of GAAP? There are few reasons why IFRS should not become a global standard other than, like the UK’s feeling for retaining sterling, the US has a strong historical attraction to its own standards and it will be a political as well as an accounting decision to move away from them.
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