An approach tried and rejected in the auditing of internal control over financial reporting may now be considered as a method for auditing the use of fair value measurements in public company accounting.
In the tumultuous early years of internal control auditing under Sarbanes-Oxley’s Section 404 and Auditing Standard No. 2, auditors were ordered to assess the process a company used to determine whether its internal control over financial reporting was sound. Amid widespread criticism that mandating an assessment of management’s assessment helped drive auditors to excessive procedures, the Public Company Accounting Oversight Board ultimately dropped that requirement from the revised internal control auditing rules it enshrined in Auditing Standard No. 5 at the end of May.
