Board Releases Additional Guidance for Audits of Internal Control

Washington, D.C., Nov. 22, 2004

The Public Company Accounting Oversight Board today released the third in a series of staff questions and answers to assist in the implementation of PCAOB Auditing Standard No. 2, regarding audits of public companies' internal control over financial reporting.

The questions and answers, prepared by the PCAOB’s Office of the Chief Auditor, emphasize the flexibility provided by Auditing Standard No. 2 in several areas.

"Some auditors and issuers have been interpreting the standard as being more prescriptive and demanding more work than was intended,’’ said PCAOB Chief Auditor Douglas Carmichael. “These staff questions and answers should provide these auditors and issuers with a better understanding of the standard so that they can apply their judgment in their circumstances in a reasonable and appropriate manner."

Among the topics addressed in the staff guidance released today are audits of multi-national companies that involve the work of more than one auditor; audits of federally insured financial institutions; the timing of auditors' communications to management and audit committees regarding material weaknesses or significant deficiencies in internal control; evaluations of deficiencies in information technology general controls; and the ability of outside auditors to use internal auditors to provide direct assistance in the audit of internal control over financial reporting.

The PCAOB previously released staff guidance on Auditing Standard No. 2 on June 23 and October 6, 2004. The guidance is available under Standards, Staff Questions and Answers at