Sarbanes-Oxley (SOX) - Assessing Material Impact 3 CPE

Per Auditing Standard 5 (AS5), the auditor must evaluate the severity of each control deficiency to determine whether the deficiencies, individually or in combination, are material weaknesses.  The key question to ask is…what parameters should be considered when determining materiality?

In planning and performing the audit, the auditor is not required to search for deficiencies that, individually or in combination, are less severe than a material weakness.  There are several definitions of materiality utilized in the profession that are promulgated by the American Institute of Certified Public Accountants (AICPA), Public Company Accounting Oversight Board (PCAOB), Committee of Sponsoring Organizations (COSO) and others.

This course covers several aspects about the concepts of material weakness and significant deficiency.  We evaluate recent cases of material weakness disclosures and updates from the PCAOB.

Information within this course comes from readily available public domain documents and is utilized by the trainer as a supplement for relaying the course content.

Note: The concepts outlined in this course are up to date and relevant in regards to the Sarbanes-Oxley legislation. Although there have not been any changes in the legislative concepts of the law since it’s release in 2002, some aspects of executing the work have evolved. This speaker is preparing a series of courses titled “Sarbanes-Oxley 20 years later”. Those courses can be found individually on the platform and would be beneficial for anyone involved with compliance.

NOTE: The Instructor has created 5 new segments on Sarbanes-Oxley Update - 20 Years Later:
Sarbanes-Oxley Update - 20 Years Later: Accounting Risk Assessment Considerations
Sarbanes-Oxley Update - 20 Years Later: Sourcing Emerging Risks Part 1
Sarbanes-Oxley Update - 20 Years Later: Evaluating Testing Processes
Sarbanes-Oxley Update - 20 Years Later: Sourcing Emerging Risks Part 2
Sarbanes-Oxley Update - 20 Years Later: Examining Fraud Risks

Prerequisites

No Advanced Preparation or Prerequisites are needed for this course. 

Learning Objective

• Evaluate the various definitions of deficiencies utilized by the Committee of Sponsoring Organizations, Audit Clarity Standard 325 and Auditing Standard 5.
• Identify methods to assess deficiency impact and distinguish between a significant deficiency and a material weakness.
• Explore the concept of deficiency aggregation.
• Explore indicators of a material weakness and examine risk factors for considering the severity of a deficiency through utilization of relevant examples.
• Examine requirements for deficiency communication.
• Explore the history of disclosed deficiencies and financial re-statement study.
• Explore PCAOB current priorities and released updates.

Last updated/reviewed: March 5, 2024