May 11, 2007
SCOTT GRAHAM/STAFF
csgraham@bizjournals.com
Beginning next year, privately held businesses will face a strict set of auditing standards similar to those that comprise the Sarbanes-Oxley Act of 2002 and affect public companies.
The American Institute of Certified Public Accountants' auditing standards board released earlier this year measures that will change all aspects of how a private firm is audited. Like Sarbanes-Oxley, the new guidelines are in response to corporate scandals that rocked the financial world a few years ago, said Carl Kampel, director of professional standards at Ellin & Tucker, Chartered in Baltimore.
"Considering the existing standards and the after-taste of the scandals, I think (the auditing standards board) saw the need to beef up auditing standards for private companies, too," Kampel said.
Among other things, the new standards require auditors to:
- Have a greater understanding of the private companies they audit and their respective industries;
|
-
Gain a better understanding of the internal controls –such as approvals—used by their clients;
-
Direct more attention to areas of higher risk within a business; and,
-
To be more diligent in alerting private firms to any deficiencies in their internal controls.
"These standards re-rewrite the fundamental building blocks of auditing," said Bo Fitzpatrick, president of Audit Watch, an industry training and consulting firm based in Herndon, Va. "They modernize the audit process."
The new standards go into effect with audits performed on or after December 31, 2007.
The long lead time gives auditors and private businesses time to adjust to the changes.
Kampel said auditing firms will need to provide additional training for auditors and take more time getting to know their clients' respective business and industry.
Meanwhile, the costs of audits likely will increase for private firms, Fitzpatrick said. But it's not clear by how much audit fees will rise, and auditors typically don't disclose how much they charge.
Kampel said it is his view that private businesses haven't started to focus on the new auditing changes. |
