In the meantime, IFRS-GAAP convergence has been moving steadily since U.S. and international standard-setters officially kicked off the project five years ago. And, to be sure, their work can be completed and put in place before the convergence of auditing standards.
At the same time, U.S. auditors have some work to do before they could deal with a proliferation of IFRS-prepared financial statements by U.S.-based companies, if the Securities and Exchange Commission gives such an allowance, as it is expected to do this spring. (Companies based in countries that use the IASB version of IFRS are already allowed to do the same for their U.S. filings.)
The Big Four accounting firms claim they can quickly take on auditing IFRS-prepared financial statements because some of their staffs have already had exposure to the international rules from their work abroad. Still, the majority of their experience has been with the American generally accepted accounting principles, and the smaller accounting firms have done even less work with IFRS. For those reasons, the day of an immediate switchover from U.S. GAAP to IFRS is far off, says Tom Ray, chief auditor at the PCAOB. “It will certainly take us some time for the entire profession to get educated, and more people need to get more experience in applying IFRS,” he told CFO.com.
That education at universities — which is just starting to get under way, albeit slowly — will also occur for regulators, including the PCAOB. The audit firms’ watchdog has already begun to be exposed to IFRS through its inspections of firms that audit foreign private issuers. It is also working on training its staff on IFRS and may have to shift its priorities if the SEC allows U.S. companies to use the international standards.
“The board would have to evaluate the need for any additional adjustments to its programs and consider the need for new initiatives to prepare for such a significant transition in financial reporting and address any concomitant risks related to public company auditing,” the PCAOB wrote in its most recent strategic plan for the next five years.