ABSTRACT
Introduction The US Public Company Accounting Oversight Board (PCAOB) requires the auditor of a public company registered with the US Securities and Exchange Commission (SEC) to evaluate and report on the e ectiveness of a company’s internal control over nancial reporting system (ICOFR). Given that hundreds of rms around the world are registered with the SEC, auditors in many countries have become familiar with PCAOB standards for the Integrated Audit. As noted before, this book features a complete integration of International Auditing and Assurance Services Board (IAASB) and PCAOB audit standards. However, one major di erence between a GAAS Audit (i.e., IAASB standards-based) and an Integrated Audit (i.e., PCAOB standardsbased) is that in the Integrated Audit the auditor must test and report on the e ectiveness of ICOFR. This PCAOB requirement is based on the rationale that all public companies should have strong internal control systems that reduce control risk to a relatively low level for all material classes of transactions and account balances. Management of SEC registrants, except for the very smallest rms (less than $100 million in sales or market capitalization), have little choice but to implement controls over material transactions that directly a ect nancial reporting because failure to do so will result in an adverse audit opinion about the e ectiveness of ICOFR(i).
