2-3 internal control

understand reporting on financial statements and internal control over financial reporting under section 404 of the Sanbanes-Oxley Act.

As discussed in chapter 1, section 404 of the SARBANES-OXLEY ACT requires the auditor of a public company to attest to management’s report on the effectiveness of internal control over financial reporting. Since 2004, larger public companies have been required by the SEC to annually obtain an auditor’s report on internal controls over financial report. As noted in chapter 1, non-accelerated filers have been exempt from this requirement and the passage by congress of the 2010 financial reform legislation made that exemption permanent for non-accelerated filers.如第1章所述，非加速申请者免除了这一要求，国会通过2010年金融改革立法，非加速申请者的豁免成为永久的。

PCAOB auditing standard 5 requires the audit of internal control to be integrated with the audit of financial statements. However, the auditor may choose to issue separate reports, such as the separate report on internal control over financial reporting or in a combined report. The combined report on financial statements and internal control over financial reporting addresses both the financial statements and management’s report on internal control over financial reporting. While the combined report is permitted, the separate report on internal control over financial reporting is more common and includes these elements. 

The introductory, scope, and opinion paragraphs describe that the scope of the auditor’s work and opinion is on internal control over financial reporting, and the introductory paragraph highlights management’s responsibility for and its separate assessment of internal control over financial reporting.

The introductory and opinion paragraphs also refer to the framework used to evaluate internal control.

The report includes a paragraph after the scope paragraph defining internal control over financial reporting. Such as “a company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1)pertain to the maintenance of records that, in reasonable detail, accurately, and fairly reflect the transactions and dispositions of the assets of the company.(2)provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with the authorizations or management and directors of the company;and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,use, or disposition of the company’s assets that could have a material effect on the financial statements.

The report also includes an additional paragraph before the opinion that addresses the inherent limitations of internal control.

Although the audit opinion on the financial statements addresses multiple reporting periods, the auditor’s opinion about the effectiveness of internal control is as of the end of the most recent fiscal year.

The last paragraph of the report includes a cross-reference to the auditor’s separate report on the financial statements. Such as “we also have audited, in accordance with the standards of the public company accounting oversight board, the consolidated balance sheets of Westbrook company, inc.as of December 31,2011 and 2010, and the related consolidated statements of income, shareholders’ equity and cash flows for each of the three years in the period ended December 31,2011 of Westbrook company, inc. And our report dated February 11, 2012 expressed an unqualified opinion thereon.