A PCAOB progress report on Auditing Standard no. 2 found several key areas in which auditors could improve performance. Based on observations of inspections of approximately 275 audits conducted in the second year of the standard’s implementation, the board said auditors could increase efficiency by fully integrating the audit of internal control with the financial statement audit; applying a top-down approach to testing controls; assessing the level of risk at the assertion level, rather than only at the account level; and increasing the use of the work of others. The inspectors found that efficiency had increased from the first year of AS2 implementation as auditors became more experienced with the standard and were out from under the initial time constraints. (In May, the PCAOB replaced AS2 with a new standard, AS5. See “ Highlights,” page 10.) The progress report is available at www.pcaobus.org/Inspections/Other/2007/04-18_Release_2007-004.pdf.
The AICPA’s Private Companies Practice Section created an online toolkit devoted to Statement on Auditing Standards no. 112, Communication of Internal Control Related Matters Identified in an Audit. SAS 112 is effective for audits of periods ending on or after Dec. 15, 2006. The toolkit includes talking points, sample client letters and a newsletter template. It is available for PCPS member firms at www.pcps.org.