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US GAAP and US GAAS Audits including SOX 404 |
Abstract
Local subsidiaries of United States public companies (“SEC registrants”) are required to prepare their financial information for their parent in accordance with US Generally Accepted Accounting Principles (“US GAAP”). Often, the local subsidiary is required to have that information independently audited. The audit can comprise a Financial Statement Audit (FSA) and an Internal Control Audit (“ICA”). These audits will usually be done in accordance with US Generally Accepted Auditing Standards (“US GAAS”) and the Standards of the Public Company Accounting Oversight Board (“PCAOB”).
Challenge
Australian audit professionals are skilled in auditing financial statements prepared based on Australian equivalents to International Financial Reporting Standards (“A-IFRS”) under Australian Auditing Standards. However, Australian audit professionals are not always skilled in auditing financial statements prepared based on US GAAP under US GAAS and PCAOB standards. As an example of the specific audit requirements in the US, the Sarbanes-Oxley Act of 2002 and in particular section 404 (“SOX 404”) requires SEC registrants to make an annual assessment of internal controls over financial reporting (“ICFR”) and provide an annual assertion on the effectiveness of their ICFR. SOX 404 requires that auditors of the financial statements of those companies attest to and report on management's assessment of the effectiveness of internal control over financial reporting (the “Internal Control Audit” or “ICA”). Our role as auditors is to express two opinions as a result of the Internal Control Audit: one on the fairness of management’s assessment and one on the effectiveness of ICFR. To support our opinions we must evaluate and test management’s assertion process and perform our own tests of the design and operating effectiveness of ICFR. The requirements of an ICA under PCAOB audit standards are more onerous than the audit requirements under Australian Auditing Standards.
Approach
Deloitte has many of its audit professionals skilled and accredited to perform audits for US reporting purposes. We ensure that our people are appropriately trained and kept up to date on current auditing and accounting standards. We have regular liaison with our US counterparts to ensure seamless delivery of our work. We utilise state of the art audit software to conduct our audits. We use software that is developed to comply with US GAAS and PCAOB standards so that we have the comfort of knowing that our procedures are comprehensive and compliant.
Solution
Deloitte has accreditation and extensive practical experience over many years in conducting audits of the local subsidiaries of SEC registrants in the Life Sciences and Healthcare space.