Integrated Audits Of Public Companies

Chapter 18: Integrated Audits of Public Companies

This chapter explained the nature of integrated audits of public companies performed in response to the Sarbanes-Oxley Act of 2002 and in accordance with Public Company Accounting Oversight Board Standard No. 2. To summarize:

Section 404(a) of the Sarbanes-Oxley Act requires management to acknowledge its responsibility for establishing and maintaining adequate internal control and provide an assessment of internal control effectiveness as of the end of the most recent fiscal year.

Section 404(b) of the Sarbanes-Oxley Act requires the auditors to attest to and report on the assessment made by management, as well as to provide their own opinion on the effectiveness of internal control.

Deficiencies relating to internal control are considered significant when there is more than a remote likelihood that a misstatement that is more than inconsequential may occur and be undetected. A deficiency is considered to be a material weakness when it involves a material amount.

An integrated audit includes an audit report on both the financial statements and internal control. To issue such a report the auditors perform procedures to test controls over all significant accounts, as well as substantive tests to support their opinion on the fairness of the financial statements.

Internal control audit reports are modified for a material weakness that exists at year-end. The report issued includes an adverse opinion indicating that effective internal control does not exist. If the scope of the auditors' work is limited, they should issue a qualified opinion or a disclaimer of opinion, or they should withdraw from the engagement.

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