Yesterday, The Public Company Accounting Oversight Board released the third in a series of staff questions and answers to assist in the implementation of PCAOB Auditing Standard No. 2, regarding audits of public companies’ internal control over financial reporting.
The latest group of questions and answers, prepared by the PCAOB’s Office of the Chief Auditor, were intended partially to respond to criticism that the standard is too prescriptive. At a Senate hearing in September, corporate executives like Eli Lilly Chief Accounting Officer Arnie Hanish and HSBC Holdings Group Finance Director Douglas Flint specifically described related “unfortunate consequences, perhaps unintended” of Sarbanes-Oxley. Flint stated that the way SOX being implemented by the accounting profession has become “meticulously prescriptive” and detailed. The danger, noted Flint, was that the SOX 404 process (e.g., documentation) “becomes the objective rather than the means to the end.”
