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The Public Company Accounting Oversight Board is considering making changes in the standards for audit confirmations after a recent wave of auditing scandals.

The PCAOB voted to issue for public comment a concept release on possible revisions to the audit confirmations standard, AU Sec. 330. Confirmation is an audit process in which an auditor obtains and evaluates a direct communication from a knowledgeable third party in response to a request for information regarding account balances, transactions or other items that comprise a company’s financial statements. Confirmations may be an important source of the evidence that auditors obtain as part of an audit of a public company’s financial statements.

The PCAOB is issuing the concept release to seek public comment on the potential direction of a standard-setting project that could result in an amendment to, or a new auditing standard on, the board’s current standard on audit confirmations.

”The audit confirmation continues to be an important tool in conducting an effective and quality audit”, - said PCAOB Chairman Mark W. Olson in a statement. - “It is important today to update the standard on confirmations, given the significant advances in technology and methods of communication. This concept release will provide additional transparency to the public and allow for early input regarding the board’s direction in considering a new standard”.

The members of the board felt the standard needed updating in the light of the wave of auditing scandals in recent years, such as the Madoff, Satyam and Parmalat cases.

“Virtually everyone agrees that the current auditing standard on confirmations should be modernized. It was written in the early 1990s, before technology gave us today’s sophistication in security and encryption of e-mail and online transactions”, - said PCAOB member Steven B. Harris. - “The standard should address the use and reliability of confirmations received electronically. It should address the authenticity and accuracy of direct access to online account information. The use of such procedures could improve the effectiveness and efficiency of the auditing process”.

Other concerns about the current standard, he noted, are that it does not consider how auditors should respond to the disclaimers and restrictive language inserted by a confirming party – the use of which is increasing. The standard also does not address an appropriate auditor response when management asks the auditor not to confirm certain accounts.

The PCAOB is seeking comment on the concept release for a 45-day period. For more information, visit www.pcaobus.org