On January 15, 2010, the SEC approved Auditing Standard No. 7, Engagement Quality Review (EQR). The standard is effective for engagement quality reviews of audits and interim reviews for fiscal years that began on or after December 15, 2009. Accordingly, for interim reviews of public companies that file financial reports on a calendar-year basis, the EQR standard is applicable beginning with the quarter ending March 31, 2010.
As discussed in the August 10, 2009 issue of Securities & Financial News to Note, on July 28, 2009, the Public Company Accounting Oversight Board (PCAOB) voted to adopt the EQR. The EQR standard is an internal quality control process that provides a framework for an engagement quality reviewer, who did not work on a particular audit, to objectively evaluate the audit work by the engagement team. Specifically, the EQR standard will require the engagement quality reviewer to perform certain procedures designed to focus the reviewer on an evaluation of the significant judgments made and related conclusions reached by the engagement team. The PCAOB plans to publish “Staff Questions and Answers” on implementation of Auditing Standard No. 7 in the near future.