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Control Freak: Audit Firms Placing More Scrutiny on Controls

Tammy Whitehouse | June 10, 2014

This summer many public companies will be spending an exorbitant amount of time examining their control documentation as audit regulators—and hence audit firms—focus not just on the detection of controls, but also whether they are operating effectively.

The Public Company Accounting Oversight Board is shining new light on internal controls and whether auditors have adequately audited management’s assertions on the effectiveness of controls.

As a new round of inspection reports begins to emerge—so far Deloitte’s is the only major 2013 report to be published—the number of deficient audits has not diminished but the nature of the deficiencies has changed. The Deloitte report notes that the firm may have properly identified a particular internal control and verified that it occurred, but didn’t evaluate adequately whether it was effective. In nearly every mention of internal control problems, inspectors say auditors failed to evaluate whether the control operated “at a...

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