SOX and the PCAOB Flashcards
Under the Sarbanes-Oxley Act of 2002, exactly how many consecutive years may an audit partner lead an audit for an issuer?
5 years
According to the Sarbanes-Oxley Act of 2002, which nonaudit services can be provided by a registered public accounting firm to the client contemporaneously with the audit when preapproval is granted by audit committee action?
Tax services
List the five primary responsibilities of the PCAOB.
1-Registration of public accounting firms;
2-Inspection of registered public accounting firms;
3-Standard setting;
4-Enforcement;
5-Funding.
The Sarbanes-Oxley Act of 2002 consists of 11 “Titles,” the first four of which are directly applicable to auditors. What is the purpose of Title III?
It established requirements related to “corporate responsibility” to make executives take responsibility for the accuracy of financial reporting (including a requirement for certification by the entity’s “principal officers”) and to make it illegal for management to improperly influence the conduct of an audit
How frequently is the Public Company Accounting Oversight Board (PCAOB) required to conduct inspections of registered public accounting firms?
- Firms that provide audit reports for at least 100 issuers - PCAOB must inspect annually;
- Firms that provide audit reports for fewer than 100 issuers - PCAOB must inspect every three years.
What does PCAOB (AS 1) state?
References in auditor’s reports to the standards of the PCAOB (audit or review) rather than GAAS; also include the city and state
What does PCAOB (AS 3) state?
Audit Documentation- same as AU-C 230 except 45 days after report date, and retention of 7 years of workingpapers; also sig findings in engagement completion document required (GAAS highly recommended)
Describe the top-down approach.
A risk-based approach to auditing that begins at the financial statement level and with the auditor’s understanding of the overall risks to internal controls over financial reporting (ICFR). The auditor then focuses on “entity-level” controls and works down to significant accounts and disclosures and their relevant assertions.
What type of opinion is required on internal control over financial reporting when a material weakness exists?
Adverse opinion.
What effects on the auditor’s report, if any, does a correction of a material misstatement to previously issued financial statements have?
The auditor’s report should include an explanatory paragraph describing the inconsistency;
The auditor should evaluate the adequacy of the company’s disclosure regarding any such restatement.
What are the two specific matters that affect the auditor’s evaluation of consistency of financial statements as prescribed in the Public Company Accounting Oversight Board’s Auditing Standard No. 6?
1-A change in accounting principle; and
2-A restatement to correct a misstatement in previously issued financial statements.
Should a member of a registered public accounting firm that participated on the engagement become employed with the client in a significant accounting position (CEO, CFO, controller, CAO, or equivalent position), the firm is prevented from conducting the audit for…
1 year
