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A88715 1 (2005-10-31)

handle is hein.gao/gaobadvwt0001 and id is 1 raw text is: A 0 Comptroller General Accountability * Integrity * Reliability of the United States United States Government Accountability Office Washington, DC 20548 October 31, 2005 Mr. John Fogarty, Chair Auditing Standards Board AICPA 1211 Avenue of the Americas New York, NY 10036-8775 Subject: Proposed Statement on Auditing Standards -Communication of Internal Control Related Matters Noted in an Audit, (to supersede Statement on Auditing Standards No. 60, Communication of Internal Control Related Matters Noted in an Audit) This letter provides the U.S. Government Accountability Office's (GAO) comments on the Auditing Standards Board's (ASB) September 1, 2005, exposure draft of a proposed Statement on Auditing Standard (SAS) entitled Communication of Internal Control Related Matters Noted in an Audit. We commend the ASB for the many provisions in the proposed standard that would add clarity and rigor to auditor internal control communications in the United States. Overall, we support the proposed standard. We are especially pleased that the proposed standard would require auditors to communicate in writing to management and those charged with governance all significant deficiencies and material weaknesses in internal control over financial reporting that were noted during the audit. The proposed standard goes on to state that these matters should be communicated even if they were previously communicated to these parties in connection with previous audits. This requirement is consistent with the longstanding requirement of Government Auditing Standards. We also support the provisions in the proposed standard that recognize that (1) the significance of a deficiency in internal control depends on the potential for misstatement, not on whether a misstatement has actually occurred, and (2) the body to whom internal control matters are communicated may take different forms. In addition, we believe that the ASB's decision to incorporate terminology and definitions used by the PCAOB will enhance consistency of practice among auditors in the United States. While we support the thrust of the exposure draft, we urge the ASB to remove the Framework for Evaluating Control Deficiencies from the proposed standard and issue the Framework as separate guidance. We are making this suggestion for several reasons: (1) the role of the Framework in the hierarchy of Generally

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