Question

PCAOB Auditing Standard 5 does not identify which of the following situations as one in which the auditor will modify the audit report on ICFR effectiveness?

a. When there is a restriction on the scope of the engagement.
b. When there is other information contained in management's annual report on ICFR.
c. When elements of management's annual report on internal control are incomplete or improperly presented.
d. When the annual report includes a copy of the annual certification pursuant to Section 302 of the Sarbanes-Oxley Act.

Answer 1

PCAOB Auditing Standard 5 requires audit report modifications for restrictions on the scope of engagement and for incomplete or improperly presented elements in management's report. However, it does not require modifications when the annual report contains other information or includes annual certification pursuant to Section 302 of the Sarbanes-Oxley Act.

Step-by-step explanation:

The Public Company Accounting Oversight Board (PCAOB) Auditing Standard 5 outlines the responsibilities of auditors when evaluating and reporting on the effectiveness of a company's internal control over financial reporting (ICFR). The auditor must modify the audit report on ICFR effectiveness in the following circumstances:

• When there is a restriction on the scope of the engagement, which may prevent the auditor from obtaining sufficient evidence.
• When elements of management's annual report on internal control are incomplete or improperly presented.

However, PCAOB Auditing Standard 5 does not identify the need to modify the audit report when:

• There is other information contained in management's annual report on ICFR.
• The annual report includes a copy of the annual certification pursuant to Section 302 of the Sarbanes-Oxley Act.

Thus, the situation in which the auditor will not modify the audit report on ICFR effectiveness is when the annual report includes a copy of the annual certification pursuant to Section 302 of the Sarbanes-Oxley Act (option d).