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An unofficial transcript of the Public Company Accounting Oversight Board Roundtable on Reporting on Internal Control was convened by the Public Company Accounting Oversight Board at the Capital Hilton on Tuesday, July 29, 2003.
An archive of the webcast of the program can be found on the Public Company Accounting Oversight Board’s website at www.pcaobus.org.
The document is titled, ‘ROUNDTABLE ON REPORTING ON INTERNAL CONTROL’. You can download the document and search on the term ‘key control’. There are at least ten references to ‘key control’ in the document with the related dialogue from the PCAOB.
Additionally, AS2, Audit Standard No. 2 addresses important controls that should be tested to comply with SOX. It provides significant guidance about other information that might be helpful in making a decision to determine if a control is considered a ‘key control’ for SOX purposes and should be tested.
AS2:
http://www.pcaobus.org/Rules/Rules_of_the_Board/Auditing_Standard_2.pdf
Characteristics of a Key Control
Factors management should consider in determining which controls to test include:
The magnitude of the potential misstatement that could result from failure of the control
The likelihood that failure of the control could result in a misstatement
The degree to which other controls, if effective, achieve the same control objective
Controls to be tested include:
Controls over initiating, recording, processing, reconciling, and reporting significant account balances, classes of transactions and disclosures, and related assertions embodied in the financial statements
Controls over the selection and application of accounting policies in conformity with GAAP
Controls related to the prevention, identification, and detection of fraud
Controls on which other significant controls are dependent (includes IT controls e.g. information security, program change control, computer operations)
Each significant control in a group of controls that functions together to achieve a control objective
Controls over significant non-routine and non-systematic transactions (such as accounts involving judgment
estimates)
Controls over the period-end financial reporting process, including controls over procedures used to enter transaction totals into the general ledger; to initiate, record, and process journal entries in the general ledger; and to record recurring and nonrecurring adjustments to the financial statements (e.g., consolidating adjustments, report combinations,
reclassifications)
Regards,
milan