By: Cydney Posner

BNA is reporting on a PLI presentation at which Daniel Goelzer, a member of the PCAOB, outlined problems with, and anticipated changes to, AS 2, which governs internal control audits. Goelzer said that the PCAOB will seek to make changes to ensure that AS 2 does not promote needless work by, for example, eliminating the requirement that the auditor assess management's process for assessing internal controls. In addition, AS 2 will permit the auditor to rely on the conclusions it reached in the prior year and to rely on the work of others. The PCAOB also intends to simplify AS 2 by making it more principles-based and to make the standard more reasonable by addressing the "materiality" definitions, which relied on tests like "more than remote." The revisions to AS 2 will also incorporate the previous PCAOB guidance advising auditors about efficient performance of the audit, by, for example, making it more risk-based. The changes to the standards are expected to be operative in time for audits at the end of 2007. However, many commentators have raised questions about whether auditors will really be able to "dial back" the extent of their SOX 404 audits.

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