PointofLaw.com
 Subscribe Subscribe   Find us on Twitter Follow POL on Twitter  
   
 
   

 

 

Is the PCAOB Turning Back Towards AS2?

| No Comments


One of the most controversial parts of the Sarbanes-Oxley Act was section 404(b), which required audits of internal controls over financial reporting. The 404 audits were conducted pursuant to the Public Company Accounting Oversight Board's Auditing Standard No. 2. Guided by this standard, auditors began a lucrative practice of auditing companies' internal controls with a bottom-up, check-the-box approach. Companies objected that the approach cost far more than regulators had anticipated--enough to make some public companies rethink their decision to go public. In 2007, a reluctant PCAOB issued Auditing Standard No. 5 to replace the earlier standard. Its approach allowed auditors to use their judgment to focus on critical areas, rather than requiring them to conduct procedures just to say that they had. Yesterday, the PCAOB staff issued a lengthy practice alert directing auditors to be more thorough. The alert's issuance was prompted by the problems that the PCAOB has identified in its inspections of internal control audits. The length and relative inflexibility of the guidance suggest that companies may want to brace themselves for another upsurge in audit costs as auditors seek to prove themselves to the PCAOB.

Leave a comment

Once submitted, the comment will first be reviewed by our editors and is not guaranteed to be published. Point of Law editors reserve the right to edit, delete, move, or mark as spam any and all comments. They also have the right to block access to any one or group from commenting or from the entire blog. A comment which does not add to the conversation, runs of on an inappropriate tangent, or kills the conversation may be edited, moved, or deleted.

The views and opinions of those providing comments are those of the author of the comment alone, and even if allowed onto the site do not reflect the opinions of Point of Law bloggers or the Manhattan Institute for Policy Research or any employee thereof. Comments submitted to Point of Law are the sole responsibility of their authors, and the author will take full responsibility for the comment, including any asserted liability for defamation or any other cause of action, and neither the Manhattan Institute nor its insurance carriers will assume responsibility for the comment merely because the Institute has provided the forum for its posting.

Related Entries:

 

 


Isaac Gorodetski
Project Manager,
Center for Legal Policy at the
Manhattan Institute
igorodetski@manhattan-institute.org

Katherine Lazarski
Press Officer,
Manhattan Institute
klazarski@manhattan-institute.org

 

Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.