Relation between PCAOB Auditing Standard 5 and IT Integrated Audits

PCAOB issued AS5, a proposed auditing standard, on December 19, 2006. AS5 would supersede its auditing standard No. 2. Comments were due on February 26, 2007 and the final standard is expected later in 2007, effective date is uncertain. The Proposed Standard includes the principle of a top-down approach to the integrated audit that was discussed in the PCAOB’s May 16, 2005 guidance.

In the proposed standard, PCAOB has identified certain areas of the audit of internal control where audit efficiencies could be gained. The impact of the four primary objectives of AS5 is evaluated specific to IT General Controls (“ITGC”) audits. The four primary objectives of AS5 could result in reduced audit fees for most companies. However, the fee reduction will depend on the individual circumstances of a company. It also should be noted that any discussion the company may have with their auditors is preliminary until the PCAOB issues the final standards and the audit firms have completed their interpretations of the final standards