Introduction
In July 2002 the Sarbanes-Oxley Act was signed into law in response to a series of
corporate missteps. One of the requirements of this Act was the establishment of an
auditing standard setter for publicly traded issuers. The body established to set the
audit standards is the Public Company Accounting Oversight Board, more commonly known as
the PCAOB. The first standard adopted by the PCAOB was to adopt as a basis for beginning
all of the auditing standards issued by the Auditing Standards Board of the AICPA to that point.
The second standard the PCAOB issued addressed internal control. Paul Munter, PhD, CPA,
an audit partner with the New York office of KPMG, and a former SEC Academic Fellow,
provides his insights on this new standard.
Note: Reporting of CPE credit to a CPA's state board is the responsibility of the CPA.
Subscribers to CPE Network may not receive duplicate credit for this material,
which previously aired in the August 2004 edition of CPE Network Accounting and Auditing Report.
Organization
This text is divided into three (3) chapters:
Chapter 1 provides insight on PCAOB Standard No. 2 and what it requires of auditors and client
management.
Chapter 2 contains a detailed look at the guidance provided by PCAOB Standard No. 2.
Chapter 3 contains review problems.
Program Learning Objectives
Upon completion of this program, the user should:
- Understand the
difference between disclosure controls and internal controls over financial
reporting.
- Have an idea of what the SEC’s rules require
regarding Section 404 of the Sarbanes-Oxley Act.
- Know that
PCAOB No. 2 defines deficiency, significant deficiency, and material
weakness.