TITLE

GAAS UPDATE SERVICE. Volume 06, Issue 22

AUTHOR(S)
Georgiades, George
PUB. DATE
November 2006
SOURCE
GAAS Update Service;11/30/2006, Vol. 6 Issue 22, p1
SOURCE TYPE
Trade Publication
DOC. TYPE
Article
ABSTRACT
In August 2006, the American Institute of Certified Public Accountants' (AICPA's) Auditing Standards Board (ASB) issued conforming amendments to Chapter 5, "Reporting on an Entity's Internal Control Over Financial Reporting," of Statement on Standards for Attestation Engagements (SSAE) No. 10, Attestation Standards: Revision and Recodification (AT 501). The conforming amendments to AT 501 were issued to reflect the new terminology and guidance on identifying and evaluating control deficiencies, and communicating significant deficiencies and material weaknesses in internal control introduced in May 2006 by the issuance of Statement on Auditing Standards (SAS) No. 112, Communicating Internal Control Related Matters Identified in an Audit (SAS-112). The following conforming changes have been made to AT 501: � Eliminating the term "reportable condition" and replacing it with "significant deficiency," and incorporating the definitions of the terms: (1) "control deficiency"; (2) "significant deficiency"; and (3) "material weakness" used in Public Company Accounting Oversight Board's (PCAOB) Auditing Standard No. 2, An Audit of Internal Control Over Financial Reporting Performed in Conjunction With an Audit of Financial Statements (AS-2). � Providing guidance on evaluating: (1) deviations in the operation of controls and whether they constitute control deficiencies; and (2) the severity of control deficiencies. � Identifying specified control deficiencies that ordinarily would be considered at least significant deficiencies in internal control. � Identifying circumstances that should be regarded as at least a significant deficiency and a strong indicator of a material weakness in internal control. � Introducing the term "those charged with governance" to refer to those persons responsible for overseeing the financial reporting and disclosure process, and to whom the practitioner must communicate significant deficiencies and material weaknesses in internal control (e.g., audit committee, board of directors, finance or budget committee, or an owner in an owner-managed entity). � Requiring the practitioner to communicate in writing to management and to "those charged with governance" significant deficiencies and material weaknesses in internal control. These conforming changes are effective for subject matters or assertions as of or for periods ending on or after December 15, 2006. The conforming amendments to AT 501 and the more substantive provisions of AT 501 will be covered in two GAAS Update Services. This GAAS Update Service covers: (1) planning an examination engagement of the effectiveness of an entity's internal control; (2) obtaining an understanding of internal control; (3) evaluating the design effectiveness of controls; (4) testing and evaluating the operating effectiveness of controls; and (5) identifying and communicating deficiencies in an entity's internal control. The December 15, 2006, GAAS Update Service will cover reporting requirements in connection with an engagement to examine and report on an entity's effectiveness of internal control.
ACCESSION #
23306971

 

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