U.S. audit panel sets internal control reviews

The Public Company Accounting Oversight Board, the new U.S. regulator for auditors, Tuesday voted 5 to 0 to require auditors to review corporations' internal controls when auditing their financial statements.

Implementing orders from Congress, the board approved the new audit standard, aimed at making financial statements less vulnerable to manipulation. The standard must now be reviewed by the Securities and Exchange Commission.

"Audit fees will almost certainly increase, to some extent, as a result" of the standard adopted by the board, said board member Dan Goelzer.

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But board members were unanimous in the view that higher audit costs were worthwhile to make financial statements more reliable.

Board member Kayla Gillan warned audit firms, however, that the new standard "is not an excuse to price gouge" their clients.

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Under the new standard, auditors who routinely review public companies' books also would have to review how companies ensure their books are accurate and reliable. In some cases, that would require tracing financial transactions from start to finish, expanding the workload of auditors.

Goelzer called the standard "a sea change in the scope and work of public company auditors."