PCAOB Reports Problems with Internal Control Audits

By Cydney Posner

This article in the Wall Street Journal  reports that, in 2011, 22% (as compared to 15% in 2010) of all internal control audits by the eight biggest accounting firms that the PCAOB surveyed in 2011 were inadequate. The PCAOB reported today that, in those cases, the auditors did not obtain sufficient evidence to support their opinion that a company's internal controls were effective. In addition, the article notes, the PCAOB fears that problems in big accounting firms' audits of internal controls increases the risk that the auditors will not catch any financial error or fraud occurring at their clients.  According to a PCAOB member, when "audit firms do not approach their work appropriately, they are increasing their own risk of not detecting problems.'"

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