SOX Center

The Public Company Accounting Oversight Board today voted unanimously to propose for public comment a new standard on auditing internal control over financial reporting and other related proposals. The proposed standard would replace the Board’s existing internal control standard, Auditing Standard No. 2.

The proposed new standard on internal control is a principles-based standard designed to focus the auditor on the most important matters, increasing the likelihood that material weaknesses will be found before they cause material misstatement of the financial statements. The proposed standard also eliminates audit requirements that are unnecessary to achieve the intended benefits, provides direction on how to scale the audit for a smaller and less complex company, and simplifies and significantly shortens the text of the standard.

“Today’s proposal is the result of the PCAOB’s experience with the first two years of auditors’ implementation of the internal control provisions of the Sarbanes-Oxley Act,” said PCAOB Chairman Mark Olson. “The Board’s goal has been to apply the feedback we’ve received and our observations of implementation to create an auditing standard that preserves the intended benefits without resulting in unnecessary effort and costs. We believe the new standard will result in audits that are more efficient, risk-based and scaled to the size and complexity of each company. We look forward to comments on the proposal.”

PCAOB: Standard on Internal Control over Financial Reporting