The Public Company Accounting Oversight Board issued a report on the second year implementation of its Auditing Standard No. 2, An Audit of Internal Control over Financial Reporting Performed in Conjunction with an Audit of Financial Statements ("AS No. 2"). The report is based on PCAOB inspections that looked at portions of approximately 275 audits of internal control over financial reporting (ICFR) by registered public accounting firms.
In May 2006, PCAOB announced that during 2006 it would conduct inspections to determine whether auditors were achieving the objectives of AS No. 2 with the least expenditure of resources. Inspectors concentrated on four areas: integrating the audits of financial statements and internal control, using a top-down approach, using the work of others, and assessing risk.
"Our inspections found that progress has been made in improving the efficiency of internal control audits, but the Board believes that auditors can continue to improve their internal control audits," noted PCAOB Chairman Mark Olson. "The report includes discussion of several areas in which auditors may be able to achieve further efficiency, and the Board encourages auditors to use this report to do so."
In this report, the Board is not changing or proposing to change any existing standard, nor is the Board providing any new interpretation of any existing standards. In December 2006, the Board published proposals that would supersede AS No. 2, while preserving the principles underlying the standard. This report is a general report under the Board's Rule 4010 and does not identity any firm or firms to which the inspection observations in the report apply.