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PCAOB issues practice alert on audits of ICFR

  • PCAOB (US Public Company Accounting Oversight Board) Image

Oct 25, 2013

On October 24, 2013, the staff of the PCAOB issued Staff Audit Practice Alert No. 11, "Considerations for Audits of Internal Control Over Financial Reporting," to note deficiencies the PCAOB has observed in audits of internal control over financial reporting during the last three years.

To address the PCAOB staff's concern about significant auditing deficiencies it has noted in audits of internal control over financial reporting, the staff has issued this practice alert to highlight the areas of concern. The alert specifically addresses the following issues:

  • 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 alert also provides guidance to audit committees on their responsibilities surrounding the audits of internal controls over financial reporting:

Audit committees of companies for which audits of internal control are conducted might wish to discuss with their auditors the level of auditing deficiencies in this area identified in their auditors' internal inspections and PCAOB inspections, request information from their auditors about potential root causes of such findings, and ask how they are addressing the matters discussed in this alert. In particular, audit committees may want to inquire about the involvement and focus by senior members of the firm on these matters.

The practice alert is available on the PCAOB's Web site.

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