Auditors approval of testing key controls 1999



  • I am an internal audit manager, in charge of 404 compliance for a small/mid-size corporation i.e., non-accelerated filer.
    Is it possible to have the external auditors agree on the key controls without jeopardizing independence? I do not want to find myself in the situation of having documented and tested (what I believe to be) the key controls and the external auditors do not agree.
    Thanks for any input or reference to literature that may support my wish to gain auditor approval before moving forward in my efforts.



  • Whilst they will probably not give a direct opinion with regards to your key controls. They may be willing to review them and provide you with a few suggestions as to additional controls that may be of use.
    I have just finished up my year-end meeting with our auditors, who were exempt from attestation this year as we are as foreign accelerated issuer.
    What they wanted to know was whether or not we had considered the same items as key controls as they had, and, where they found us to not have some of their key controls, they made suggestions that they be applied going forward.



  • I agree with EMM. Your external auditors will look at what you have identified as key controls and let you know where they feel that you may have some gaps. Management, however, must first identify what it feels are the key controls financial reporting. Your auditor cannot do that for you.



  • 😉 Thanks for your speedy responses. Makes sense to me.
    EMM wrote: What they wanted to know was whether or not we had considered the same items as key controls as they had, and, where they found us to not have some of their key controls, they made suggestions that they be applied going forward.
    At what point should I review the internal controls with the external auditor? Management assessment for non-accelerated filers is required by June 30, 2008, with auditors assertation by June 30, 2009.



  • I would review controls with the auditor as soon as you have them identified. The earlier that you can agree on what controls provide adequate coverage, the sooner you can start developing test plans and testing controls.



  • 😉 Thanks for your great advice.



  • At what point where the dates for a non accelerated filer changed? The last I saw were December 15, 2007 for adoption of the controls and December 15, 2008 for the Auditors Attestation :?



  • At what point where the dates for a non accelerated filer changed? The last I saw were December 15, 2007 for adoption of the controls and December 15, 2008 for the Auditors Attestation :?
    If you are referring to the June dates noted above, that is likely due to that company having a June fiscal year end. I believe that the December 2007 and 2008 dates are still the latest for initial compliance (for fiscal years ending on or after those dates).



  • When I referred to the June dates, I was specifically referring to my company’s fiscal year end. The December 2007 and 2008 dates are still the latest dates for initial compliance. (for fiscal years ending on or after those dates).

    Sorry for the confusion



  • Thanks for this clarification. I was not looking forward to trawling through the SEC Website 🙂



  • MsStacy:
    We’re also a nonaccelerated filer and we’re trying to pinpoint key controls right now, too. We brought out external auditors in for a meeting a couple of weeks ago with the hopes that they could steer us in the right direction before we got ourselves in too deep. Instead of useful advice, we got a lot of anecdotal statements and generalizations. They were very tight-lipped about what would be expected from us. I’ll admit that I’m a newbie, but I was surprised at how tight lipped they were. We were simply hoping to get some guidance; we were not asking them to show us how to do anything.



  • I’d be seriously disappointed with my auditors if they took that approach with me now. The existing guidance does prevent a lot of dialogue around this whole area but the proposed revisions have already indicated that this is being relaxed significantly and a number of firms are already taking this on board even if it has not come into force yet.
    I would have thought also that it would depend whether you are in your live year or not because if you are in your preceding year they can again provide assistance (although that may well involve additional advisory costs which you may well be trying to avoid).
    Having a stab and presenting your proposals to your auditor first though is good practice as the impetus then lies with you and you have something tangible that you can discuss and compare notes on.


Log in to reply