PCAOB Issues New Practice Alert Addressing Recent Audit Deficiencies | Practical Law

PCAOB Issues New Practice Alert Addressing Recent Audit Deficiencies | Practical Law

The Public Company Accounting Oversight Board (PCAOB) issued a new Practice Alert to address the significant number of audit deficiencies it has observed in the last three years relating to audits of internal control over financial reporting.

PCAOB Issues New Practice Alert Addressing Recent Audit Deficiencies

Practical Law Legal Update 8-546-3086 (Approx. 3 pages)

PCAOB Issues New Practice Alert Addressing Recent Audit Deficiencies

by Practical Law Corporate & Securities
Published on 25 Oct 2013 • USA (National/Federal)
The Public Company Accounting Oversight Board (PCAOB) issued a new Practice Alert to address the significant number of audit deficiencies it has observed in the last three years relating to audits of internal control over financial reporting.
On October 24, 2013, the Public Company Accounting Oversight Board (PCAOB) issued Staff Audit Practice Alert No. 11 to address the significant number of audit deficiencies it has observed in the last three years relating to audits of internal control over financial reporting. The Alert discusses the application of Auditing Standard No. 5 and other PCAOB standards to specific aspects of audits of internal control, highlighting deficiencies the PCAOB has frequently cited in its inspection reports.
Specifically, the Alert discusses:
  • Auditors' risk assessment and the audit of internal control.
  • Selecting controls to test.
  • Testing management review controls.
  • Information technology considerations, including system-generated data and reports.
  • Roll-forward of controls tested at an interim date.
  • Using the work of others.
  • Evaluating identified control deficiencies.
The PCAOB suggests that audit committees:
  • Discuss with their auditors any auditing deficiencies in these areas found through the auditors' own internal inspections or in PCAOB inspections.
  • Request information from their auditors about potential root causes in any areas of deficiency.
  • Ask how their auditors are addressing the matters discussed in the Alert and how involved senior members of the auditing firm are in those matters.
The Alert is intended to highlight areas of frequent deficiency, but it does not impose any new rules.
For general information on auditing, see Practice Note, Auditing: An Overview.