The Public Company Accounting Oversight Board today issued a report discussing issues identified in the course of the Board's monitoring of the implementation of Auditing Standard No. 2, An Audit of Internal Control Over Financial Reporting Performed in Conjunction with an Audit of Financial Statements. That standard implements Sections 103 and 404 of the Sarbanes-Oxley Act of 2002 by establishing a process for auditing a public company's internal control over financial reporting in conjunction with an audit of financial statements.
The Board found that both firms and issuers faced enormous challenges in the first year of implementation, including strains on available resources; a shortage of staff with prior training and experience in designing, evaluating, and testing controls; and the limited timeframe that issuers and auditors had to implement Section 404. These challenges were compounded in cases in which companies needed to make significant improvements in their internal control systems to make up for deferred maintenance of those systems.
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