The regulatory mandate that audits of internal controls focus sharply on the risks of fraud or material misstatement has been heard loud and clear. Still, companies can expect some bumps along the road to achieving consistent implementation of that new attitude spelled out under Auditing Standard No. 5.
Exactly how AS5 will be implemented by audit firms is a matter of much speculation by Corporate America. Companies are still months away from closing the books for 2007, the first year they will obey new (and relaxed) rules from the Securities and Exchange Commission and the Public Company Accounting Oversight Board regarding how to assess and audit internal controls. Audit firms, meanwhile, are training staff intensively on how to conduct an internal control audit under AS5.
