The Auditing Standards Board is issuing a new standard on auditing internal controls. By adopting definitions from Auditing Standard No. 2 of the Public Company Accounting Oversight Board, the standard will make audits of public and private companies more similar."This standard is important because it requires the auditor to communicate with management those areas of their internal control system that are not up to par," said AICPA vice president of professional standards and services Chuck Landes. "We want to make it clear that management has a responsibility for not only their financial statements but their internal control systems, and they are responsible to take appropriate action with respect to any material weaknesses or significant deficiencies that the auditor may identify."
Statement on Auditing Standards 112, Communicating Internal Control-Related Matters Identified in an Audit, supercedes SAS 60 by changing the definitions of "significant deficiency" and "material weakness." It also requires auditors to communicate those deficiencies and weaknesses in writing to corporate management on an annual basis for as long as they exist, rather than just once.
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