SOX Center

The Public Company Accounting Oversight Board on May 24, 2007, will vote on a final standard on auditing internal control over financial reporting, as well as a related independence rule and conforming amendments to the Board’s auditing standards. If adopted, the new standard would supersede the Board’s existing auditing standard, Auditing Standard No. 2, “An Audit of Internal Control over Financial Reporting Performed in Conjunction with an Audit of Financial Statements.”

The Board also will vote on two recommendations to amend the Board’s rules on the frequency of inspections. The first recommendation is to propose for public comment an amendment to Rule 4003. The amendment would remove the requirement that the Board regularly inspect each registered public accounting firm that plays a “substantial role” in audits but does not issue audit reports. The Sarbanes Oxley Act of 2002 only requires the Board to inspect registered firms that regularly issue audit reports.

Accounting Education: PCAOB TO VOTE ON NEW STANDARD FOR AUDITS OF INTERNAL CONTROL

Former Senator Paul Sarbanes, D-Md., who, as the head of the Senate Banking Committee, co-authored the sweeping Sarbanes-Oxley reform act said he supports developing additional guidance for smaller filers but, not surprisingly, dismisses exempting those companies from compliance with the legislation’s rigid Section 404.

“Stop and think about that for a moment,” said Sarbanes in a speech before attendees at a conference on financial reporting and governance presented by Pace University’s Lubin School of Business, here. “That would mean that you would be exempting 80 percent of public companies from compliance.”

Sarbanes referred to recent pronouncements from the Securities and Exchange Commission and the Public Company Accounting Oversight Board regarding potential streamlining of the 404 internal controls provision, which small filers have complained is disproportionate to them in terms of cost and manpower.

WebCPA: SOX Co-Author Supports Tweaking Act, Not Exemption

Commissioners gave the SEC staff the go-ahead to work with the PCAOB on making the proposed internal-control auditing standard less prescriptive and more aligned with Section 404.

The Securities and Exchange Commission is sending its accounting staff to work with the Public Company Accounting Oversight Board on additional revisions to the auditing standard that has been criticized by public companies and legislators for creating costly audits of internal controls.

At a Wednesday SEC hearing, staff members of the Office of the Chief Accountant asked the commissioners for permission to work with the PCAOB to address several concerns that were raised during the current public comment period on the revised Auditing Standard No. 2 — which both regulators loosely refer to as AS5. Saying the staff will be “fine-tuning” AS5, the commissioners voted unanimously on all the staffers’ requests.

The staff will now work on matching the tone and wording of AS5 with the SEC’s revised guidance for company management on complying with Section 404, the Sarbanes-Oxley Act’s provision for management’s assessment of internal controls over financial reporting. They will also work with the PCAOB to incorporate more principles-based language into AS5, clarify how the new standard is scalable for companies of all sizes, and adopt a less prescriptive approach for how auditors will decide to use the work of others, such as a company’s internal auditors.

CFO.com: SEC Tells Staff to Revise AS5

The Public Company Accounting Oversight Board announced Wednesday that deputy chief auditor Laura Phillips will step down later this year. It said Phillips had not yet accepted another position.

Phillips led the oversight body’s controversial effort to implement internal- control reporting requirements mandated by Congress in the 2002 Sarbanes-Oxley Act. Under pressure from businesses and lawmakers, the oversight board is scrapping its original audit standard and proposed a new one it hopes to finalize by midyear. The new audit standard, which must be approved by the Securities and Exchange Commission, is intended to address complaints about the cost of complying with requirement for public companies to review their internal financial-reporting controls annually and have findings undergo separate scrutiny by their outside auditor. Larger U.S. companies are already subject to the requirement and smaller firms facing it for the first time this year worry that compliance costs could be crushing.

Dow Jones Newswires: Accounting Oversight Board Senior Staffer Stepping Down

Retired Congressman Michael Oxley blames the PCAOB for starting “all the problems” with the Sarbanes-Oxley Act.

Michael Oxley has been guaranteed immortality — and perhaps a degree of infamy — since his name was affixed to the Sarbanes-Oxley Act of 2002, the most comprehensive set of corporate rule changes since the 1930s.

Earlier this year, Oxley retired from Congress after serving 25 years. However, the 63-year-old Republican from Ohio is not ready to fade from the scene. In the last month, he has picked up two new jobs, as counsel for the Cleveland-based law firm Baker Hostetler and non-executive vice chairman of Nasdaq.

The act that bears his name missed unanimous passage through Congress by a mere three votes in the House, and initially received grudging lip service from a shaken corporate America. But a little noticed section, just 168 words long, soon changed the debate from whether Sarbox was essential to restoring confidence in the U.S. capital market to whether it was destroying it. Section 404, which required companies and their auditors to examine and report on the processes behind their financial reporting, quickly became the most expensive and hated provision of the act.

CFO.com:Oxley: I’m Not Happy with Sarbox

On April 10th, at 1:30 p.m. EST, join OiWare’s CEO Alec Brophy for a 30-minute Web cast with an interactive discussion .

Join OiWare’s CEO Alec Brophy 30 Minute Web cast with an interactive discussion will highlight:

- Market trends and developments
- Vision on the market and positioning of OiWare
- Concerns for executives
- The need for a Sarbanes-Oxley and corporate governance solution

Register at:www.oiware.com

By December 15, 2007, all public companies with yearly revenues totaling $75,000,000 or less are mandated to comply with section 404(a) of the Sarbanes-Oxley (SOX) Act of 2002. Section 404(a) holds management responsible for internal control procedures Section 404(a) which requires these non-accelerated filer’s to complete documentation of internal controls and procedures for financial reporting.

Software vendors are creating new and revising old products to handle the Sarbanes-Oxley compliance, while auditors try to keep from drowning in the workload. In many cases, organizations are using the software products they know rather than adopting new products that can increase their productivity and help them reduce costs and work hours. Typically, clients are tracking their significant accounts and processes in either a relational database or in a simple Excel-based spreadsheet. A survey of SOX compliance implementers noted that 88.9 percent of the respondents were using generic products such as Excel, Access or Visio to complete SOX related tasks. Companies can save valuable time and money resources by instead implementing software applications designed specifically for SOX compliance.

New chief accountant named for SEC’s division of investment management

Richard F. Sennett has been named chief accountant of the Securities and Exchange Commission’s division of investment management.

He will have primary responsibility for oversight of the financial reporting and accounting practices of registered investment companies.

According to the SEC, he was instrumental in the development and implementation of the division’s Sarbanes-Oxley annual report review process.

AccountancyAge: Sarbox man gets chief accountant role at SEC

Financial reporting is changing around the world and the implications are even being felt across the pond

When a tide turns you can hear, down on the foreshore, a huge noise. It is the sound of pebbles being pulled this way and that as the waters change direction. Journalists love the idea of tides turning. It is a wonderful metaphor and an easy one to use. But often when we speak of tides turning we are describing an idea rather than a process. Often we are describing something which we think ought to come about rather than something which is actually happening. Often the roar of pebbles being upturned in a changing flood of water is missing.

But I do think that when it comes to describing what is happening in the world of American financial reporting and regulation we can genuinely say that the tide is turning. There is a distinct sound of turmoil down on the foreshore.

AccountancyAge/Robert Bruce: Corporate governance - Ripple effect

Finance chiefs think that the revised SEC and PCAOB standards won’t change anything because they cancel each other out.

Mismatches between the internal-controls proposals of the Securities and Exchange Commission and the Public Company Accounting Oversight Board will keep compliance with Section 404 of the Sarbanes-Oxley Act overly burdensome and costly, CFOs think.

In letters to the SEC and the PCAOB commenting on the regulators’ proposed revisions to their guidelines, senior finance executives say that the tone and wording of the rules are too different to accomplish their main goal: to get senior top corporate management and audit firms on the same page in assessing and attesting to a company’s internal controls over financial reporting.

CFO.com: “CFOs: 404 Compliance Back at Square One”

The Federal Reserve Bank of New York has issued a paper describing a number of sound practices for financial and accounting controls at financial institutions. Weaknesses in these controls can contribute to inaccurate or incomplete financial reporting and potentially result in legal fees and fines, significant reputational damage and a loss of business.

pdf: Financial And Accounting Controls: Industry Sound Practices For Financial Institutions