Promising a new direction in the audit of internal control over financial reporting, the Public Company Accounting Oversight Board has put to pasture the oft criticized Auditing Standard No. 2, replacing it with Auditing Standard No. 5.
The newly approved AS5 differs from what the Board proposed when it first exposed its package of rules to reform the implementation of Sarbanes-Oxley Section 404 in late December 2006. The revised standard has been modified to ensure it is consistent with new guidance for management, which was also adopted last week by the Securities and Exchange Commission. It leans more heavily on the importance of fraud risk and anti-fraud controls.
