Overview of PCAOB Auditing Standard No. 5,
An Audit of Internal Control Over Financial Reporting that is Integrated with an Audit of Financial Statements
Provided for use with Auditing and Assurance Services: An Integrated Approach, 12th edition
Alvin A. Arens, Randal J. Elder, Mark A. Beasley
Pearson Prentice Hall, Inc.

INTRODUCTION

The 12th Edition of Auditing and Assurance Services: An Integrated Approach, includes extensive coverage of key provisions of the Sarbanes-Oxley Act (the Act) and related Public Company Accounting Oversight Board (PCAOB) standards and rules applicable to the audits of financial statements and internal control over financial reporting for public companies. At the time the 12th Edition was released in March 2007, the PCAOB had issued Auditing Standard Nos. 1-4. On May 24, 2007, the PCAOB issued Auditing Standard No. 5, An Audit of Internal Control Over Financial Reporting that is Integrated with an Audit of Financial Statements (AS5). Subject to SEC approval, AS5 is effective for audits of fiscal years ending on or after November 15, 2007. AS5 supersedes PCAOB Auditing Standard No. 2 (AS2), An Audit of Internal Control Over Financial Reporting Performed in Conjunction with an Audit of Financial Statements, which was issued in June 2004. The PCAOB and the Securities and Exchange Commission (SEC) have closely monitored the implementation of AS2 to evaluate the effectiveness of public company auditors in applying the provisions to audits of large public companies already subject to Section 404 reporting requirements. While many believe the audits of internal control have produced significant benefits, the costs of compliance with Section 404 and implementation of AS2 have been significant. AS5 is intended to improve the efficiency of the audit of internal control over financial reporting without reducing its effectiveness by