Auditing


  The PCAOB maintained its focus on audits of internal control over financial reporting (ICFR) by issuing in October its second report in 11 months on the subject.

Staff Audit Practice Alert No. 11, Considerations for Audits of Internal Control Over Financial Reporting, discusses application of PCAOB standards to audits of internal control, including discussion of:

  • Auditors’ risk assessment and the audit of internal control.
  • Selecting controls to test.
  • Testing management review controls.
  • Information technology considerations, including system-generated data and reports.
  • Roll-forward of control testing performed at an interim date.
  • Using the work of others.
  • Evaluating identified control deficiencies.


“Auditors should take note of the matters discussed in this alert in planning and performing their audits, given the importance of the controls companies use to produce their financial statements,” PCAOB Chairman James Doty said in a news release.

The PCAOB also issued a report in December 2012 to inform auditors on common problems to avoid in audits of internal control over financial reporting.

Engagement partners, senior engagement team members, and engagement quality reviewers should keep these matters in mind, PCAOB Chief Auditor Martin Baumann said in a news release. Baumann also said auditing firms should consider whether additional training of their personnel is needed.

Audit committees of public companies for which audits of internal control are conducted may want to take note of the alert, the release said. The full alert is available at tinyurl.com/kxshpph.


  The PCAOB is establishing a Center for Economic Analysis to advise the board on how economic theory, analysis, and tools can enhance the effectiveness of its programs.

University of Chicago economist Luigi Zingales will be the founding director of the center, which will promote and encourage economic research related to the role of the audit in capital formation and investor protection.

The center will host a 2014 conference on economic research related to the role of the audit in capital markets and will call soon for research reports to be presented at the conference.


  Health care regulations associated with the Patient Protection and Affordable Care Act (PPACA), P.L. 111-148, have created new opportunities for internal auditors.

But internal auditors may need to get more familiar with PPACA’s provisions to help their organizations understand the risks associated with the law and their organizations’ preparedness to mitigate those risks, according to a new report.

More than 4 in 10 (41%) of 428 North American internal audit managers said risks associated with PPACA will be moderately or extremely impactful on their organization, according to the fall “Pulse of the Profession” survey by the Institute of Internal Auditors (IIA). The survey report is available at tinyurl.com/mfmg4ky.

An additional 37% said PPACA-associated risks will be somewhat impactful to their organizations. But among respondents who said PPACA would apply to their organization, 38% rated themselves as not very knowledgeable of PPACA, and another 43% said they are just somewhat knowledgeable.

“One of the greatest opportunities facing the profession this coming year relates to the U.S. Affordable Care Act,” IIA President and CEO Richard Chambers said in a news release. “To take advantage of this opportunity, internal audit cannot assume a reactive posture. This regulation challenges internal audit to become a visionary, proactive function in their organization.”

Being aware of the effects of regulatory activity allows internal auditors to show foresight on compliance risk issues, Chambers said.

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