[Federal Register: November 24, 2004 (Volume 69, Number 226)]
[Notices]
[Page 68434-68435]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24no04-123]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-50688; File No. PCAOB-2004-08]
Public Company Accounting Oversight Board; Order Approving
Proposed Conforming Amendments to PCAOB Interim Standards Resulting
From the Adoption of PCAOB Auditing Standard No. 2, ``An Audit of
Internal Control Over Financial Reporting Performed in Conjunction With
an Audit of Financial Statements''
November 17, 2004.
I. Introduction
On September 16, 2004, the Public Company Accounting Oversight
Board (the ``Board'' or the ``PCAOB'') filed with the Commission
proposed Conforming Amendments to PCAOB Interim Standards Resulting
From the Adoption of PCAOB Standard No. 2, ``An Audit of Internal
Control Over Financial Reporting Performed in Conjunction With an Audit
of Financial Statements'' (``Conforming Amendments''), pursuant to the
Sarbanes-Oxley Act of 2002 (the ``Act'') \1\ and Section 19(b) of the
Securities Exchange Act of 1934 (the ``Exchange Act''). The Conforming
Amendments would change and add to the interim standards certain text,
including references, to assist auditors in performing integrated
audits of financial statements and internal control and would apply
certain concepts developed in Auditing Standard No. 2 to assist an
auditor engaged solely to audit the financial statements. Notice of the
proposed Conforming Amendments was published in the Federal Register on
October 13, 2004,\2\ and the Commission received two comment letters.
For the reasons discussed below, the Commission is granting approval of
the proposed Conforming Amendments.
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\1\ Sections 101, 103 and 107 of the Act.
\2\ Release No. 34-50495 (October 5, 2004); 69 FR 60913 (October
13, 2004).
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II. Description
The Act establishes the PCAOB to oversee the audits of public
companies and related matters, to protect investors, and to further the
public interest in the preparation of informative, accurate and
independent audit reports.\3\ Section 103(a) of the Act directs the
PCAOB to establish auditing and related attestation standards, quality
control standards, and ethics standards to be used by registered public
accounting firms in the preparation and issuance of audit reports as
required by the Act or the rules of the Commission. Section 103(a)(3)
of the Act also states that the Board may adopt any statement of
auditing or related professional practice standards developed by a
professional group of accountants as interim or transitional standards,
with the Board retaining full authority to modify, supplement, revise
or subsequently amend, modify or repeal, in whole or in part, any such
statements. Pursuant to this authority, the PCAOB adopted the auditing
and related professional practice standards of the American Institute
of Certified Public Accountants, as they existed on April 16, 2003, as
interim or transitional standards (the ``interim standards'').\4\
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\3\ Section 101(a) of the Act.
\4\ The Commission approved the PCAOB's action in Release No.
34-47745, Order Regarding Section 103(a)(3)(B) of the Sarbanes-Oxley
Act of 2002, (April 25, 2003).
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The proposed Conforming Amendments specifically identify changes to
the interim standards as a result of adopting PCAOB Auditing Standard
No. 2. The identification of such changes is intended to help auditors
comply with the Board's standards, as well as to eliminate potential
confusion and inconsistencies in interpretation with respect to the
affected portions of the Board's interim standards.
The Conforming Amendments also supersede AT Section 501, Reporting
on an Entity's Internal Control Over Financial Reporting (``AT 501'')
\5\ and SAS No. 60, Communication of Internal Control Related Matters
Noted in an Audit (``SAS No. 60'').\6\ AT 501 provides guidance for
performing an attestation engagement to issue an examination report on
the effectiveness of an entity's internal control over financial
reporting as of a point in time. The Board believes
[[Page 68435]]
that Auditing Standard No. 2 is a superior standard to its predecessor
attestation standard, AT 501, and the proposal would supersede AT 501,
effective immediately upon approval of the Conforming Amendments by the
Commission. SAS No. 60 provides guidance in identifying and
communicating conditions that relate to a company's internal control
observed during an audit of the financial statements. SAS No. 60 for
integrated audits (i.e., audits of both financial statements and
internal control over financial reporting) would be replaced by
portions of Auditing Standard No. 2, and the proposal also would amend
SAS 60 as it applies to financial statement only audits.
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\5\ Statements on Standards for Attestation Engagements (``AT'')
are codified into the AICPA Professional Standards, volume 1.
\6\ Statements on Auditing Standards (``SAS'') are codified into
the AICPA Professional Standards, volume 1.
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The proposed Conforming Amendments have multiple effective dates.
The amendments that affect integrated audits for accelerated filers
would be effective for fiscal years ending on or after November 15,
2004 (i.e., at the same time as Auditing Standard No. 2 for integrated
audits of accelerated filers that are subject to the Commission's rules
implementing Section 404 \7\ of the Act). Those amendments that affect
audits of financial statements only and those that affect integrated
audits of non-accelerated filers subject to the Commission's rules
implementing Section 404 of the Act would be effective for fiscal years
ending on or after July 15, 2005. Finally, the superseding of AT 501
would be effective immediately upon approval by the Commission.
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\7\ See Release No. 33-8238 (June 5, 2003) [68 FR 36636] and
Release No. 33-8392 (February 24, 2004) [69 FR 9722].
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III. Discussion
The Commission's comment period on the Proposed Standard ended on
November 3, 2004, with the Commission receiving two comment letters.
The comment letters came from two registered public accounting firms.
Both commenters expressed support for Commission approval of the
Conforming Amendments.
IV. Conclusion
On the basis of the foregoing, the Commission finds that proposed
Conforming Amendments are consistent with the requirements of the Act
and the securities laws and are necessary and appropriate in the public
interest and for the protection of investors.
It is therefore ordered, pursuant to Section 107 of the Act and
Section 19(b)(2) of the Exchange Act, that the proposed Conforming
Amendments to PCAOB Interim Standards Resulting From the Adoption of
PCAOB Standard No. 2, ``An Audit of Internal Control Over Financial
Reporting Performed in Conjunction With an Audit of Financial
Statements'' (File No. PCAOB-2004-08), be and hereby are approved.
By the Commission.
J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E4-3310 Filed 11-23-04; 8:45 am]
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