Q: Would the requirement to communicate with audit committees apply to situations where the auditor is providing a consent (e.g., related to a 1933 Act filing)? If so, what information should be communicated to the audit committee?

A: Yes. In that situation, the audit report is deemed to be filed. As a result, the auditor would be required to communicate the relevant information to the audit committee under Rule 2-07. Since the auditor would have communicated the relevant information when the audit report was originally filed, this communication at the time of the consent may properly be restricted to updating the audit committee. However, if in the process of applying audit procedures required by PCAOB AS 4101, Responsibilities Regarding Filings Under Federal Securities Statutes, matters come to the auditor's attention that would or could have affected the financial statements or the auditor's report that was previously filed, all relevant information should be communicated to the audit committee.

Q: The rules require that auditors communicate to the audit committee alternative applications of GAAP relating to material items that have been discussed with management. Does this require that auditors discuss with audit committees transactions where there are alternative applications of GAAP that occurred subsequent to the balance sheet date that are not reflected in the financial statements (including the related notes) subject to audit?

A: No. Because the rules require the auditor to communicate alternative applications of GAAP that are material and that the communications occur before the audit report is filed with the Commission, the rules relate to items that are material to the financial statements on which the auditor is expressing an opinion. Therefore, such transactions that have occurred subsequent to the balance sheet date and which are not required to be reflected in the financial statements or the related notes are not required to be communicated to the audit committee until the period in which the transactions affect the financial statements. It should be noted, however, that Release No. 33-8183 (January 28, 2003),Strengthening the Commission’s Requirements Regarding Auditor Independence, text indicates that over time these communications should occur on a "real time" basis and, thus, the auditor is strongly advised to consider communicating the matters to the audit committee at the first opportunity after the matters arise.

Q: Assume that the issuer's filing contains the report of a successor audit firm and a predecessor audit firm. Each of the audit firms will be required to provide a consent. Must each of the audit firms provide the communications with the audit committee?

A: No. When there is a predecessor-successor auditor relationship, only the successor auditor is required to communicate with the audit committee. Prior to providing its consent, however, the predecessor is required to perform the audit procedures specified in PCAOB AS 4101, Responsibilities Regarding Filings Under Federal Securities Statutes.

Q: Assume that a portion of the company's consolidated financial statements were audited by a firm other than the principal accountant. Due to the significance of the portion audited by the other firm, the principal accountant decides to make reference to the other accountant. Because reference will be made to the other firm's report, both the audit reports of the principal accountant and the other accountant must be filed. Is the other accountant required to make the specified communications with the issuer's audit committee?

A: Yes. The Commission's rules require that the auditor communicate with the audit committee before the audit report is filed with the Commission. Because, in this situation, the other auditor's report will be filed, the other auditor also is required to provide the required communications with the audit committee.