February 26, 2007
As requested by SEC and PCAOB, follow our comments on the proposed standard and guidance regarding Section 404:
Accordingly to the PCAOB proposals, after the first-year's audit of internal control, the auditor should be allowed to reduce the nature, timing, and extent of testing based on his or her cumulative knowledge related to individual controls.
We believe that the proposed standard appropriately incorporate the value of cumulative knowledge, clarifying the factors that affect the risk associated with internal control.
Considering the circumstances in which would be appropriate for the auditor to rely upon the walkthrough procedures as sufficient evidence of operating effectiveness, we believe the Board should clarify how auditors should apply these rule, considering: