Does the PCAOB’s proposed replacement for Auditing Standard No. 2 offer too much leeway for professional judgment?

With just a few days until the comment period ends, the Public Company Accounting Oversight Board got an earful from its advisory board on Thursday about the new standard for auditors’ attestation of corporate internal controls. In a nutshell, the corporate executives and accounting experts questioned whether the more-flexible standard will lead to less-effective audits.

The PCAOB is attempting to simplify its most-contentious auditor guideline, Auditing Standard No. 2, in response to concerns in the business community that audits under the Sarbanes-Oxley Act have become too onerous and costly. The proposed standard — commonly referred to by the board as AS5 — encourages auditors to take a “top down, risk-based approach” by focusing on only those areas in which a material weakness could lead to a misstatement.

[1] cfo.com: AS5: More Flexible, Less Effective?