(The news featured below is a selection from the news covered in the Federal Securities Report Letter, which is distributed to subscribers of the Federal Securities Law Reports.)

Interim professional Audit Standards Adopted by PCAOB

Pursuant to Sarbanes-Oxley Act mandates, the Public Company Accounting Oversight Board adopted several existing professional standards on an interim basis. These standards will govern professional conduct until the board establishes its own standards.

On an interim basis, the board adopted the Generally Accepted Auditing Standards as proposed and promulgated by the American Institute of Certified Public Accountants and the Accounting Standards Board. With regard to attestations, the board adopted the "Statements on Standards for Attestation Engagements" and related "Interpretations and Statements of Position" adopted by the Accounting Standards Board, as in effect on April 16, 2003. The ASB's quality control standards were also adopted by the PCAOB as its interim standard.

AICPA rules concerning ethics and auditor independence will serve as the PCAOB's interim standards in these areas. The board noted, however, that its standards "do not supplant the Commission's independence rules" and if the board standards differ from those adopted by the SEC, then firms must comply with the more restrictive requirements. The interim standards will become effective upon SEC approval.

The PCAOB stated that its standards-setting process will include the appointment of an advisory group to assist in the formulation of new standards and in the review of existing standards. This advisory group will have between 15 and 30 members selected by the PCAOB from practicing auditors, preparers of financial statements and the investor community. The board, determined, however, not to exercise the authority granted in Section 103 of the Sarbanes-Oxley Act to designate or recognize any professional group of accountants to propose standards. The board stated, though, that "it will consider carefully proposed auditing standards recommended to it by any person or group, including any group of accountants."

¨ PCAOB Releases No. 2003-005 and 2003-06 will be published in a forthcoming REPORT.