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ExpandAS No. 1: References in Auditors’ Reports to the Standards of the Public Company Accounting Oversight Board
ExpandAS No. 3: Audit Documentation
CollapseAS No. 4: Reporting on Whether a Previously Reported Material Weakness Continues to Exist
Auditing Standard No. 4
Appendix A: Illustrative Reports on Whether a Previously Reported Material Weakness Continues to Exist
Appendix B: Background and Basis for Conclusions
ExpandAS No. 5: An Audit of Internal Control Over Financial Reporting That Is Integrated with An Audit of Financial Statements
ExpandAS No. 6: Evaluating Consistency of Financial Statements
ExpandAS No. 7: Engagement Quality Review
ExpandAS No. 8: Audit Risk
ExpandAS No. 9: Audit Planning
ExpandAS No. 10: Supervision of the Audit Engagement
ExpandAS No. 11: Consideration of Materiality in Planning and Performing an Audit
ExpandAS No. 12: Identifying and Assessing Risks of Material Misstatement
ExpandAS No. 13: The Auditor's Responses to the Risks of Material Misstatement
ExpandAS No. 14: Evaluating Audit Results
ExpandAS No. 15: Audit Evidence
ExpandAS No. 16: Communications with Audit Committees
ExpandAS No. 17: Auditing Supplemental Information Accompanying Audited Financial Statements
ExpandAU Section 100 - Statements on Auditing Standards -- Introduction
ExpandAU Section 200 - The General Standards
ExpandAU Section 300 - The Standards of Field Work
ExpandAU Section 400 - The First, Second, and Third Standards of Reporting
ExpandAU Section 500 - The Fourth Standard of Reporting
ExpandAU Section 600 - Other Types of Reports
ExpandAU Section 700 - Special Topics
ExpandAU Section 800 - Compliance Auditing
ExpandAU Section 900 - Special Reports of the Committee on Auditing Procedures

 
Auditing Standard No. 4

Reporting on Whether a Previously Reported Material Weakness Continues to Exist

Appendix A - Illustrative Reports on Whether a Previously Reported Material Weakness Continues to Exist

Paragraphs 51 through 60 of this standard provide direction on the auditor's report on whether a previously reported material weakness continues to exist.  The following examples illustrate the application of those paragraphs.

Example A-1

Illustrative Auditor's Report for a Continuing Auditor Expressing an Opinion that a Previously Reported Material Weakness No Longer Exists

Report of Independent Registered Public Accounting Firm

We have previously audited and reported on management's annual assessment of XYZ Company's internal control over financial reporting as of December 31, 200X based on [ Identify control criteria, for example, "criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)." ].  Our report, dated [ date of report ], identified the following material weakness in the Company's internal control over financial reporting:

[ Describe material weakness ]

We have audited management's assertion, included in the accompanying [title of management's report], that the material weakness in internal control over financial reporting identified above no longer exists as of [ date of management's assertion ] because the following control(s) addresses the material weakness:

[ Describe control(s)

Management has asserted that the control(s) identified above achieves the following stated control objective, which is consistent with the criteria established in [ identify control criteria used for management's annual assessment of internal control over financial reporting ]: [ state control objective addressed ].  Management also has asserted that it has tested the control(s) identified above and concluded that the control(s) was designed and operated effectively as of [ date of management's assertion ].  XYZ Company's management is responsible for its assertion.  Our responsibility is to express an opinion on whether the identified material weakness continues to exist as of [ date of management's assertion ] based on our auditing procedures. 

Our engagement was conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the engagement to obtain reasonable assurance about whether a previously reported material weakness continues to exist at the company.  Our engagement included examining evidence supporting management's assertion and performing such other procedures as we considered necessary in the circumstances.  We obtained an understanding of the company's internal control over financial reporting as part of our previous audit of management's annual assessment of XYZ Company's internal control over financial reporting as of December 31, 200X and updated that understanding as it specifically relates to changes in internal control over financial reporting associated with the material weakness described above.  We believe that our auditing procedures provide a reasonable basis for our opinion.

In our opinion, the material weakness described above no longer exists as of [ date of management's assertion ].

We were not engaged to and did not conduct an audit of internal control over financial reporting as of [ date of management's assertion ], the objective of which would be the expression of an opinion on the effectiveness of internal control over financial reporting.  Accordingly, we do not express such an opinion.  This means that we have not applied auditing procedures sufficient to reach conclusions about the effectiveness of any controls of the company as of any date after December 31, 200X, other than the control(s) specifically identified in this report.  Accordingly, we do not express an opinion that any other controls operated effectively after December 31, 200X. 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of the effectiveness of specific controls or internal control over financial reporting overall to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

[ Signature ]
[ City and State or Country ]
[ Date ]

Example A-2

Illustrative Auditor's Report for a Successor Auditor Expressing an Opinion that a Previously Reported Material Weakness No Longer Exists

Report of Independent Registered Public Accounting Firm

We were engaged to report on whether a previously reported material weakness continues to exist at XYZ Company as of [ date of management's assertion ] and to audit management's next annual assessment of XYZ Company's internal control over financial reporting.  Another auditor previously audited and reported on management's annual assessment of XYZ Company's internal control over financial reporting as of December 31, 200X based on [ Identify control criteria, for example, "criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)." ].  The other auditor's report, dated [ date of report ], identified the following material weakness in the Company's internal control over financial reporting:

[ Describe material weakness ]

We have audited management's assertion, included in the accompanying [title of management's report], that the material weakness in internal control over financial reporting identified above no longer exists as of [ date of management's assertion ] because the following control(s) addresses the material weakness:

[ Describe control(s)

Management has asserted that the control(s) identified above achieves the following stated control objective, which is consistent with the criteria established in [ identify control criteria used for management's annual assessment of internal control over financial reporting ]:  [ state control objective addressed ].  Management also has asserted that it has tested the control(s) identified above and concluded that the control(s) was designed and operated effectively as of [ date of management's assertion ].  XYZ Company's management is responsible for its assertion.  Our responsibility is to express an opinion on whether the identified material weakness continues to exist as of [ date of management's assertion ] based on our auditing procedures. 

Our engagement was conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the engagement to obtain reasonable assurance about whether a previously reported material weakness continues to exist at the company.  Our engagement included obtaining an understanding of internal control over financial reporting, examining evidence supporting management's assertion, and performing such other procedures as we considered necessary in the circumstances.  We believe that our auditing procedures provide a reasonable basis for our opinion.

In our opinion, the material weakness described above no longer exists as of [ date of management's assertion ].

We were not engaged to and did not conduct an audit of internal control over financial reporting as of [ date of management's assertion ], the objective of which would be the expression of an opinion on the effectiveness of internal control over financial reporting.  Accordingly, we do not express such an opinion.  This means that we have not applied auditing procedures sufficient to reach conclusions about the effectiveness of any controls of the company other than the control(s) specifically identified in this report.  Accordingly, we do not express an opinion that any other controls operated effectively.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of the effectiveness of specific controls or internal control over financial reporting overall to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

[ Signature ]
[ City and State or Country ]
[ Date ]

Example A-3

Illustrative Auditor's Report for a Continuing Auditor Expressing an Opinion on Only One Previously Reported Material Weakness When Additional Material Weaknesses Previously Were Reported

Report of Independent Registered Public Accounting Firm

We have previously audited and reported on management's annual assessment of XYZ Company's internal control over financial reporting as of December 31, 200X based on [ Identify control criteria, f or example, "criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)." ].  Our report, dated [ date of report ], identified the following material weakness in the Company's internal control over financial reporting:

[ Describe material weakness ]

We have audited management's assertion, included in the accompanying [title of management's report], that the material weakness in internal control over financial reporting identified above no longer exists as of [ date of management's assertion ] because the following control(s) addresses the material weakness:

[ Describe control(s) ]

Management has asserted that the control(s) identified above achieves the following stated control objective, which is consistent with the criteria established in [ identify control criteria used for management's annual assessment of internal control over financial reporting ]:  [ state control objective addressed ].  Management also has asserted that it has tested the control(s) identified above and concluded that the control(s) was designed and operated effectively as of [ date of management's assertion ].  XYZ Company's management is responsible for its assertion.  Our responsibility is to express an opinion on whether the identified material weakness continues to exist as of [ date of management's assertion ] based on our auditing procedures. 

Our engagement was conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the engagement to obtain reasonable assurance about whether a previously reported material weakness continues to exist at the company.  Our engagement included examining evidence supporting management's assertion and performing such other procedures as we considered necessary in the circumstances.  We obtained an understanding of the company's internal control over financial reporting as part of our previous audit of management's annual assessment of XYZ Company's internal control over financial reporting as of December 31, 200X and updated that understanding as it specifically relates to changes in internal control over financial reporting associated with the material weakness described above.  We believe that our auditing procedures provide a reasonable basis for our opinion.

In our opinion, the material weakness described above no longer exists as of [ date of management's assertion ].

We were not engaged to and did not conduct an audit of internal control over financial reporting as of [ date of management's assertion ], the objective of which would be the expression of an opinion on the effectiveness of internal control over financial reporting.  Accordingly, we do not express such an opinion.  This means that we have not applied auditing procedures sufficient to reach conclusions about the effectiveness of any controls of the company as of any date after December 31, 200X, other than the control(s) specifically identified in this report.  Accordingly, we do not express an opinion that any other controls operated effectively after December 31, 200X.  Our report on management's annual assessment of XYZ Company's internal control over financial reporting, dated [ date of report ], [attached or identify location of where the report is publicly available ] identified additional material weaknesses other than the one identified in this report.  We are not reporting on those other material weaknesses and, accordingly, express no opinion regarding whether those material weaknesses continue to exist after [ date of management's annual assessment, e.g., December 31, 200X ]. 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of the effectiveness of specific controls or internal control over financial reporting overall to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

[ Signature ]
[ City and State or Country ]
[ Date ]