Amendments to AS2 Aim To Rethink Auditor’s Role | AccountingWEB

Amendments to AS2 Aim To Rethink Auditor’s Role

The Public Company Accounting Oversight Board (PCAOB) submitted a draft of changes for its Auditing Standard 2 (AS2) to the Securities and Exchange Commission (SEC) back in September. AS2 has been criticized for its conservative use by auditors, according to CFO.com. The SEC and participants in Sarbanes-Oxley (SOX) roundtables have been seeking revisions.

“We’ve received a lot of feedback that the number of auditors are hesitant to implement the concepts and direction from [the May 2005 guidance] for fear they would violate the standard itself,” said Thomas Ray, PCAOB’s chief auditor and director of professional standards.

AS2 is intended to guide accountants through the process of auditing a company’s internal controls per SOX Section 404. CFO.com also reports that companies using AS2 as a default framework found that they had done more work than necessary. The standard has been the blame for overly aggressive and costly audits to many companies and accounting industry professionals.

Thomas Ray told CFO.com that there has been confusion with the initial definitions especially when evaluating the severity of a weakness. Clarification of phrases such as, “material weaknesses” and “significant deficiency” are possibly in the works. One situation found with the phrase “more than a likelihood” seems to affect auditors’ focus toward minor details instead of seeking “reasonable possibility.”

Amendments to AS2 are a top priority for the PCAOB, according to FierceSarbox.com. Many feel that any changes are coming too late but proceeding in the right direction.

Ray told CFO.com, “We want to encourage more use of others’ work,” as well as allowing for the use of previous experience. “Now, each year’s audit must stand on its own but that does not mean you disregard everything you know about the company’s internal controls.” Ray said that amendments to AS2 would be introduced “soon”, but cautioned, “Don’t wait for us to amend AS2 to make your audits more efficient.”

Wait, there's more!
There's always more at AccountingWEB. We're an active community of financial professionals and journalists who strive to bring you valuable content every day. If you'd like, let us know your interests and we'll send you a few articles every week either in taxation, practice excellence, or just our most popular stories from that week. It's free to sign up and to be a part of our community.
Premium content is currently locked

Editor's Choice

WHAT KIND OF FIRM ARE YOU?
As part of our continued effort to provide valuable resources and insight to our subscribers, we're conducting this brief survey to learn more about your personal experiences in the accounting profession. We will be giving away five $50 Amazon gift cards, and a $250 Amazon gift card to one lucky participant.
This is strictly for internal use and data will not be sold
or shared with any third parties.