From: John S. Cochrane
Sent: May 17, 2006
Subject: File No. 4-511

Dear Sirs

I wish to make a suggestion for a change in auditing standard number 2 that might help focus efforts on important matters. In paragraph 72, several examples are given for non-routine transactions - including physical inventory counts and calculating depreciation expense. I believe that these were poor choices of examples because in most of the companies that I am working with, these transactions have become routine. They are performed monthly or more often and are clearly supported by systems, policies and procedures. Further, the inherent risk of error is low. Because they are listed as examples of non-routine transactions, auditors and managers are feeling obligated to set aside their judgement and give them a higher degree of scrutiny than they deserve. Further, the standard is being used to select other transactions, many of which could not possibly result in a material error or fraud - for example - employee terminations, etc. I suggest that the examples be changed to include a purchase or disposal of a part of a business, a large non-standard reinsurance contract, or a reorganisation. The risk of material misstatement with respect to the latter examples is clearly much higher and the additional scrutiny is very important.

For your consideration

John S. Cochrane
Raymond Chabot Grant Thornton, S.E.N.C.R.L.(LLP)