The American Institute of CPAs' Auditing Standards Board has reissued its exposure draft containing a proposed statement on standards for attestation engagements.

The board originally issued the exposure draft in March 2003, before deciding in September 2004, during the review process, that the statement should be rewritten to include guidance from the Public Company Accounting Oversight Board's Auditing Standard No. 2, "An Audit of Internal Control over Financial Reporting Performed in Conjunction with an Audit of Financial Statements."

The revamped statement from the Auditing Standards Board, still entitled "Reporting on an Entity's Internal Control over Financial Reporting," is now available to the public for comment until May 19.

The proposed standard is being issued to enhance the practitioner's ability to identify and evaluate control deficiencies and to report on internal controls. The Auditing Standards Board believes that the proposed guidance will strengthen the quality of examinations of internal control.

Among other measures, the proposed standard:

  • Provides guidance to a practitioner on evaluating management's basis or substantiation for making an assertion about an entity's internal control over financial reporting;
  • Recognizes that, for nonissuers, the group or person charged with governance may exist in a variety of forms; and,
  • Incorporates the definitions of the terms "control deficiency" and "material weakness" used in PCAOB Auditing Standard No. 2, and replaces the term "reportable condition" with the term "significant deficiency," and its related definition.

Also accompanying the exposure draft is a document entitled "A Framework for Evaluating Control Exceptions and Deficiencies," which is designed to assist practitioners in applying the proposed standards by presenting a method for evaluating the significance of exceptions and control deficiencies.The executive summary and the entire text of the exposure draft, as well as how to submit comments on the work, are available at www.aicpa.org/members/div/auditstd/Internal_Control_Financial_Reporting.htm .

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