PCAOB the standard setting body for SEC issued Auditing Standard 4 on "Reporting on Whether a Previously Reported Material Weakness Continues to Exist". you can find the text of the entire PCAOB's Auditing Standard 4 here. But for those of you who do not want to go through the entire 58 pages of the standard, here a short summary of what the standard says.

AS 4 basically describes the steps auditor's need to take when a company voluntarily engages them to report on a material weakness, previously identified in an annual Section 404 report no longer exists. Here are the steps the auditor needs to take to perform an engagement under AS 4:

1. Evaluate Conditions of Engagement - An auditor can perform an engagement under AS 4 only when 5 different criteria are met. These are management should accept responsibility for internal control effectiveness, management has evaluated controls addressing material weakness, management asserts controls are effective, management has sufficient evidence to support its assessment, and management has a written report to accompany auditors report.

2. Plan the Engagement - An auditor must plan an engagement under AS 4 and ensure that he has an overall understanding of company's ICOFR.

3. Using work of others - The auditor should also consider whether to use the work of others to alter the nature, timing and extent of audit work to be performed in support of his opinon.

4. Evidence Supporting Control Effectiveness - Auditor should obtain sufficient evidence supporting effectiveness of controls addressing material weakness.

5. Written Representations & Management Report - The auditor should obtain written representations and a management report which will accompany the auditors report. The auditor should ensure that such report is complete and not materially mis-stated.

6. Conclusion - The auditor should evaluate the evidence and form a conclusion. However, Since enagagement's under AS 4 are voluntary in nature, an auditor is not required to issue a report.

7. Communicate Findings to Audit Committee - Finally if circumstances warrant, auditor may communciate their findings to the audit committee. Thus, in case a material weakness continues to exist or a new material weakness is found, auditor might report to the audit committee.

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