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Unformatted text preview: Performing an integrated audit 15:19 • PCAOB standard on conducting an integrated audit • Integrated audit involves auditing a public company’s financial statements as well as its internal control over financial reporting • Public companies are required to have audited financial statements that are accompanied by (a) a management report on internal control over financial reporting and (b) an external audit report on the financial statements and the effectiveness of internal control over financial reporting • In the US, audits of publicly-traded companies are governed by rules laid down by the Public Company Accounting Oversight Board (PCAOB), which was established by Section 404 of the Sarbanes-Oxley Act of 2002. Such an audit is called an integrated audit, where auditors have the additional responsibility (other than to opine on the financial statements) of expressing an opinion on the effectiveness of company's internal control over financial reporting, in accordance with PCAOB Auditing Standard No. 5. • • AS 5 • The auditor’s objective in an audit of internal control over financial reporting is to express an opinion on the effectiveness of the company’s internal control over financial reporting. Because a company’s internal control cannot be considered effective if one or more material weakness exist, to form a basis for expressing an opinion, the auditor must plan and perform the audit to obtain competent evidence that is sufficient to obtain reasonable assurance about whether material weaknesses exist as of the date specified in management’s assessment. A material weakness in internal control over financial reporting may exist even when financial statements are not materially misstated. • At the same time, the auditor should design his other testing of controls to accomplish the objectives of both audits simultaneously. Obtaining sufficient evidence to support control risk assessments of low for purposes of the financial statements audit ordinarily allows the auditor to reduce the amount of audit wok that otherwise would have been necessary to opine on the financial statements. • • Unqualified opinion on internal control over financial reporting • The internal control report is contained in the same report that contains the opinion on the financial statements. An acceptable alternative is to issue two reports: one on the financial statements and the other on internal controls . However, if separate reports are issued, each report must refer to the other report • The auditor provides an opinion on the...
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This note was uploaded on 01/19/2011 for the course ACCT 3201 taught by Professor W during the Spring '10 term at University of Texas at Dallas, Richardson.
- Spring '10