There could be potential trouble in store for auditors whose private-company clients ask them to apply both PCAOB auditing standards and generally accepted auditing standards (GAAS). While the boundaries between the PCAOB’s auditing standards for public companies and generally accepted auditing standards for nonpublic entities are clear, nonissuers and those who govern them sometimes are confused about what the differences are and which standards apply when. The public—from which juries are drawn—may be confused, too. When you mix in hungry trial lawyers, you’ve got the makings of a “perfect storm.” This article will discuss some differences between the two sets of standards and the steps auditors should take to minimize confusion and the consequent risk of messy litigation if a private company client asks them to apply both PCAOB auditing standards and GAAS.
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