Auditing

PCAOB to Vote on Internal Controls on May 24

If a new standard is adopted, it would replace the controversial Auditing Standard No. 2, which has been hit hard for being based too heavily on ru...
David KatzMay 16, 2007

The Public Company Accounting Oversight Board will vote on a final standard on auditing internal controls over financial reporting on May 24. If it’s adopted, the new standard will replace the controversial Auditing Standard No. 2, which has been hit hard for being based too heavily on rules rather than principles.

The proposed replacement has been widely referred to as AS5. The PCAOB also plans to vote on a related independence rule and conforming amendments to the board’s auditing standards.

The PCAOB also will vote on two recommendations to amend its rules on inspections of firms that audit 100 or fewer issuers. The first recommendation is to remove a requirement that the board regularly inspect each registered public accounting firm that plays a “substantial role” in audits but does not issue audit reports. The Sarbanes-Oxley Act only requires the PCAOB to inspect registered firms that regularly issue audit reports.

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The second recommendation is a staff proposal for the board to vote on whether to keep a rule in place that extends the time period during which the board must conduct the first and second inspections of smaller firms that registered in 2003 and 2004. The rule, 4003(d), sunsets on June 30.