The PCAOB today proposed a new standard on internal control over financial reporting. The main intention of PCOAB is to make this new standard replace AS2. The new standard brings the learnings of the past two years on the table. PCAOB mentions that the new standard aims at detecting material weakness early to ensure that the same do not result in a material mis-statement in financial reporting.

You can download a copy of the proposed standard to replace the AS2 here. A detailed reading of the proposed new standard will reveal what the PCAOB intends. However, even the new proposal stresses on reducing audt effort especially for smaller companies. OVerall, the new proposed standard throws more light on:

1. Importance of risk assessment and significant controls
2. Role of materiality in financial reporting
3. Using the knowledge obtained from previous audits
4. Multi-Location requirements based on relative location risk
5. Reducing audit work based on size of the company
6. Changes in walkthrough

The board intends to get public comment on the new standard before implementing the same. The exact changes and how they would affect the process of audit of internal controls will get clarified over time.

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