Additional Notes:

1. Audit Implications of SOX

 Expanded role of auditors

◦ Must attest to the quality of their client organization’s internal controls.

◦ This constitutes the issuance of a separate audit opinion (either qualified or unqualifed) on the internal
controls in addition to the opinion on the fairness of the financial statements.
 PCAOB Standard No. 5 requires auditors to understand:

◦ Transaction flows

◦ Controls pertaining to how transactions are initiated, authorized, recorded, and reported

◦ This involves:
1st: selecting the financial accounts that have material implications for financial reporting.
2nd: Then, auditors need to identify the application controls related to those accounts.
 Auditors are responsible for detecting fraudulent activity