Big4Guy

Under the proposed AS5 issued by the PCAOB on December 19, 2006, the PCAOB has brought in a new rule under which any non-audit service which the auditor performs needs to be pre-approved by the audit committee of the issuer. Such services normally are non-audit related services related to internal controls. The new PCAOB standard lays down certain requirements for the registered public accounting firm before it proposes to internal control related non-audit services. Below, I am listing down the steps a registered accounting firm needs to take in this regard:

1. Describe the scope of the proposed service to the audit committee in writing.

2. Discuss with the audit committee the independence implications of the proposed new service.

3. Document such discussion which the firm has with the audit committee.

The main purpose of introducing this new rule is to ensure that the audit committees are provided relevant information to help them make an informed decision as to whether internal control related services affect auditor independence.

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