PCAOB on Reporting whether a Previously Reported Material Weakness Continues to Exsist

Question 1

Define a material weakness?

Answer 1

Break-down in internal controls where a material weakness or combination of significant deficiencies would flow through to the financial statements without detection resulting in a material misstatement

Question 2

What are key indicators of material weakness?

Answer 2

1) Fraud by senior management
2) Restatement of prior F/S
3) Detection of a material misstatement in the current F/S
4) Ineffective oversight by the audit committee

Question 3

If the auditors discover material weaknesses in controls, who should those be communicated too?

Answer 3

• Management AND audit committee

IN WRITING

Question 4

Who should significant deficiencies be communicated to?

Answer 4

• Audit Committee

Question 5

If the auditors believe that the audit committees oversight of internal controls is ineffective, who should that be communicated to?

Answer 5

• The full board of directors

Question 6

If there are any material weaknesses, what is the opinion?

Answer 6

Adverse Opinion- Needs to include the words material weakness in the report

Question 7

If there is a scope limitation, what should the auditor do?

Answer 7

Withdrawal or issue a disclaimer of opinion