June 03, 2006
PCAOB Takes on Challenge to Sort out AS2
The PCAOB is wasting no time in trying to resolve implementation issues with AS#2. The current lack of a risk based approach by external auditors has driven up costs and not improved quality.
This is good to see because the absolute nit-picking on form over substance that has gone on by external audit firms has been legendary. Strict and rigid interpretation of AS#2 has caused undue busy work by firms and has not addressed the important spirit of the Act which is Tone at the Top, integrity, etc.
The problem is that external auditors are accountants and they are being asked to review "soft items" such as audit committee effectiveness and management's commitment to competence, etc. They were not taught this in school. They are out of their depth. This will be the most important challenge that the PCAOB has to take on: Getting audit firms to train their staffs in entity level controls not just overkilling AP or payroll process controls.
An excerpt from an article is here:
"PCAOB Schedules June SAG Meeting
June 2, 2006 (SmartPros)
— The Public Company Accounting Oversight Board has scheduled a Standing Advisory Group meeting to discuss topics related to audits of internal control over financial reporting and other standards-setting topics.
The meeting is scheduled for June 12-13 in Washington, D.C.
Specifically, the group will discuss current PCAOB activities regarding implementation of the internal control provisions of the Sarbanes-Oxley Act of 2002 and the PCAOB's Auditing Standard No. 2.
In addition, the group will engage in a panel discussion about two aspects of internal control auditing in which the PCAOB may consider refinements to its auditing standard: the role of company-level controls in audits of internal control over financial reporting and the auditor's involvement in management's assessment of internal control. The group will also hear a panel of analysts discuss their compilations of data on corporate disclosures about internal control. The group will then identify and discuss areas of auditing and accounting that, based on this data, may pose special challenges to auditors.
Finally, the group will hear a panel of academic researchers discuss their compilations and syntheses of research related to auditing fair value and auditors' risk assessments.
The agenda and other documents for this meeting can be found on the PCAOB Web site."
If your company has to comply with Sarbanes-Oxley or MI 52-109, see www.issuescentral.com to learn more on how to effectively and rapidly comply with this legislation. See what the Compliance Playbook(tm) and Compliance Partner(tm) have to offer your company's internal controls over financial reporting project.
This is good to see because the absolute nit-picking on form over substance that has gone on by external audit firms has been legendary. Strict and rigid interpretation of AS#2 has caused undue busy work by firms and has not addressed the important spirit of the Act which is Tone at the Top, integrity, etc.
The problem is that external auditors are accountants and they are being asked to review "soft items" such as audit committee effectiveness and management's commitment to competence, etc. They were not taught this in school. They are out of their depth. This will be the most important challenge that the PCAOB has to take on: Getting audit firms to train their staffs in entity level controls not just overkilling AP or payroll process controls.
An excerpt from an article is here:
"PCAOB Schedules June SAG Meeting
June 2, 2006 (SmartPros)
— The Public Company Accounting Oversight Board has scheduled a Standing Advisory Group meeting to discuss topics related to audits of internal control over financial reporting and other standards-setting topics.
The meeting is scheduled for June 12-13 in Washington, D.C.
Specifically, the group will discuss current PCAOB activities regarding implementation of the internal control provisions of the Sarbanes-Oxley Act of 2002 and the PCAOB's Auditing Standard No. 2.
In addition, the group will engage in a panel discussion about two aspects of internal control auditing in which the PCAOB may consider refinements to its auditing standard: the role of company-level controls in audits of internal control over financial reporting and the auditor's involvement in management's assessment of internal control. The group will also hear a panel of analysts discuss their compilations of data on corporate disclosures about internal control. The group will then identify and discuss areas of auditing and accounting that, based on this data, may pose special challenges to auditors.
Finally, the group will hear a panel of academic researchers discuss their compilations and syntheses of research related to auditing fair value and auditors' risk assessments.
The agenda and other documents for this meeting can be found on the PCAOB Web site."
If your company has to comply with Sarbanes-Oxley or MI 52-109, see www.issuescentral.com to learn more on how to effectively and rapidly comply with this legislation. See what the Compliance Playbook(tm) and Compliance Partner(tm) have to offer your company's internal controls over financial reporting project.
