PCAOB Develops Four-Point Internal Control Reporting Plan

Public Companies Accounting Oversight Board brought forth a four-point plan designed to improve internal control reporting related to Sarbanes-Oxley. The Board acknowledged that they needed to balance the value of the internal control reporting requirements against the cost of increased procedures, but showed little if any willingness to jettison PCAOB Standard 2. The four-point included the following features: adjusting Statement 2 to make clear that auditors should emphasize areas with highest risk of fraud or material (significant) error, emphasize auditor efficiency in PCAOB inspections, provide more guidance and education for small accounting firms and continue to provide PCAOB small firm forums (eight scheduled in 2006).

For both good and ill (but in my opinion mostly good), PCAOB 2 and section 404 of Sarbanes-Oxley has had major impact on audit performance and cost. Possibily PCAOB could have offered more, but what they are offering here has value, especially to smaller CPA firms.