Auditing Standard 5 was approved by the body and has been touted as a
significant move towards principles-based accounting in the US. The key benefits
of AS5 centre on the fact that are auditors will have greater
scope in prioritising the results of a comapny’s internal audit.
External auditors will now be able to tell audit committees when there are
‘control deficiencies’ that are less grave than ‘material weaknesses’ but
pressing enough to warrant the attention of the company.
The PCAOB said of the move: ‘The auditing standard adopted by the board today
is principles-based. It is designed to increase the likelihood that material
weaknesses in internal control will be found before they result in material
misstatement of a company’s financial statements, and, at the same time,
eliminate procedures that are unnecessary.’
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