SOX Center

Business advisors Grant Thornton LLP have applauded the SEC and the PCAOB for their efforts in addressing the legitimate concerns of the capital markets while still reinforcing the value of Sarbanes-Oxley to investors.

“We believe that the new guidance and auditing standards strike an appropriate balance between efficiency and effectiveness, though it will take time to fully realize the effects,” the company said in a statement.

It added: “We believe that the current efforts of the Committee of Sponsoring Organizations of the Treadway Commission (COSO) will help organizations more efficiently monitor the effectiveness of their internal control systems throughout the year. COSO recently commissioned Grant Thornton LLP to develop guidance - scheduled for completion in early 2008 - that will include in-depth guidance for implementing the monitoring component of COSO’s Internal Control — Integrated Framework.”

A public discussion document regarding this guidance should be available in June 2007.

Investorsoffshore: Advisors Applaud SEC, PCAOB For Addressing Sarbanes-Oxley Concerns

CCH principal analyst and leading author on securities law, Jim Hamilton, JD, LLM, has released a white paper on the long-awaited Securities and Exchange Commission (SEC) and Public Company Accounting Oversight Board (PCAOB) issuances on internal controls over financial reporting under section 404 of the Sarbanes-Oxley Act.
CCH, a leading provider of securities law information, is part of Wolters Kluwer Law & Business.

Reporting on the adequacy of internal controls was a significant element of the corporate reforms embodied in the Sarbanes-Oxley legislation. Hamilton can explain and comment on the new regulations, including:

• Why regulators felt a new approach was necessary;
• The broad principles behind the guidance; and
• What the new issuances mean in practice for auditors.

“The issuances emphasize a ‘principles-based’ and risk-based approach,” said Hamilton. “This allows for greater discretion and judgment in assessing the effectiveness of the company’s internal control over financial reporting.”

Yahoo!Finance: New CCH White Paper Covers SEC, PCAOB Internal Controls Guidance

To help CFOs of smaller companies navigate wisely through the Sarbanes-Oxley compliance process, Lord & Benoit has published a study, “10 Threats to SOX Compliance for Smaller Public Companies.”

The study comes on the heels of actions by the SEC and PCAOB to require smaller public companies to comply with SOX this year.

In summarizing the results, Lord & Benoit suggests this list should be used by CFOs as a starting point for a macro-level risk assessment at smaller public companies. Identifying potential concerns, developing action plans to remediate these risks, and taking quick action can minimize the likelihood of an adverse Section 404 report at the end of the first year of compliance.

SmartPros: Study Outlines SOX Threats for Smaller Public Companies

The PCAOB has killed its reviled internal-control standard. Now it’s up to the SEC to pronounce it officially dead.

Perhaps the most hated rule to come out of the Sarbanes-Oxley Act is dead. Well, almost. On Thursday, the Public Company Accounting Oversight Board voted unanimously to replace its controversial internal-control auditing standard with Auditing Standard No. 5. Critics of the original standard shouldn’t celebrate just yet, however. AS5 requires the Securities and Exchange’s approval, which will likely not happen for at least another month.

The PCAOB’s Auditing Standard No. 2 is the rule largely blamed for creating excessively high audit fees for companies complying with the Sarbanes-Oxley Act. Indeed, since auditors began using AS2, companies have complained that common interpretations of the standard wrought burdensome audits by promoting work for work’s sake and encouraging a rigid checklist approach.

CFO.com: Ding-Dong, AS2 Is Dead

The US Treasury has welcomed a statement released by the Securities and Exchange Commission and the Public Company Accounting Oversight Board regarding their votes to address the implementation of Section 404 of the Sarbanes-Oxley Act:

“The SEC and the PCAOB, after carefully considering the effects of Section 404, moved this week to strike the right balance in enhancing financial reporting quality and eliminating unintended costs,” announced Under Secretary for Domestic Finance Robert K. Steel. “These key reforms should ensure that Section 404 is implemented in a risk-based and appropriately-scalable fashion, without sacrificing investor protection or diminishing the value of sound internal controls over financial reporting. Now that the regulators have acted, it is critical that public companies and the auditing profession respond to this call.”

Steel added: “Treasury congratulates the SEC, the PCAOB and their chairmen, Chris Cox and Mark Olson, for their cooperation in working to uphold investors’ confidence in and the competitiveness of America’s capital markets.”

Investorsoffshore: Treasury Welcomes Sarbanes Oxley Reforms

The financial reporting legislation may be changed in order to relax stringent regulations and reduce the cost of compliance

Regulators are preparing to review elements of the Sarbanes-Oxley Act to determine whether or not portions of the financial reporting legislation should be relaxed to ease the burden on companies doing business in the United States.

On May 24, the PCAOB (Public Company Accounting Oversight Board) — the nonprofit oversight group created to help manage application of the Sarbanes Oxley Act — plans to meet in Washington to vote on a range of topics, including several issues that could shift the application of the legislation, originally passed in 2002 to help fight corporate financial fraud.

In the meetings, the group is expected to approve a final standard for auditing internal control over financial reporting as well as a related independence rule and several other measures.

If adopted, the rule will supersede PCAOB’s existing Auditing Standard No. 2, also known as “An Audit of Internal Control over Financial Reporting Performed in Conjunction with an Audit of Financial Statements.”

The PCAOB also plans to vote on two separate recommendations to amend its rules on the frequency and level of scrutiny in required inspections to test compliance with SOX.

Info World: Regulators to begin SOX reviews

Since the passage of the Public Company Account­ing Reform and Investor Protection Act of 2002 (the Sarbanes–Oxley Act), small and mid-sized public companies have struggled to comply with its onerous provisions, which created an enormous and dispro­portionate regulatory burden. Most of these costs can be attributed to Section 404, a small section of only 168 words that requires both an internal audit and an external audit of a company’s financial accounting controls.

A growing body of evidence suggests that the unin­tended consequences of Sarbanes–Oxley, especially Section 404, are harming the U.S. economy and its financial industry. However, the problems with Sec­tion 404 are caused as much by how regulators have implemented it and how outside auditors have inter­preted it. While both the Securities and Exchange Commission (SEC) and the Public Company Account­ing Oversight Board (PCAOB) have recently released proposed changes in how Section 404 is imple­mented, it is not clear that these changes will be suffi­cient to affect auditors’ overzealous behavior in an era in which their every action may be subjected retroac­tively to a lawsuit. For that reason, auditors may need some level of protection against legal liability before they feel comfortable with reducing the scope—and cost—of Section 404 audits.

The Heritage Foundation: The Sarbanes–Oxley Act: Do We Need a Regulatory or Legislative Fix?

The US Senate’s thumping defeat of an amendment to exempt certain small and medium-sized businesses (SMBs) from compliance with Section 404 of the Sarbanes-Oxley Act is bad for business US poiticians have declared.

SMBs fell foul of political battles by those decrying the amendment as an attack on shareholder protections and others countering that SOX is crippling American businesses and preventing them from competing in a global economy.

The amendment, would have made compliance with Section 404 optional for companies with total market value of less than $700 million.

The political posturing doesn’t mean much for small and medium-sized businesses (SMBs), analyst Michael Rasmussen said. For less heat and more light on the requirements of the law, publicly traded SMBs will have to wait another month or so for the U.S. Securities and Exchange Commission and its partner in compliance, the Public Company Accounting Oversight Board (PCAOB), to approve their long-promised revised guidelines and new accounting rules.

“I think it’s par for the course now that SOX is here to stay,” said Rasmussen, who covers compliance at Forrester Research Inc. in Cambridge, Mass. “The SEC and PCAOB are working to more tightly define the scope of SOX. That is where companies will find the relief.”

ComputerWeekly: Sarbanes-Oxley defeat blow for SMBs

The Public Company Accounting Oversight Board on Friday concluded its first International Auditor Regulatory Institute.

Representatives from auditor regulators and government agencies from more than 40 countries convened on Wed., May 2, in Washington, D.C., to learn more about the PCAOB’s programs and how it carries out its mandate under the Sarbanes-Oxley Act of 2002.

The institute took place over two and a half days, with one full day devoted to discussions about the PCAOB’s inspections program. The institute also covered other activities of the PCAOB, including standard-setting, the enforcement process and international cooperation.

The Sarbanes Oxley Act directs the PCAOB to oversee and periodically inspect all accounting firms that regularly audit U.S. public companies. More than 780 audit firms currently registered with the PCAOB are located outside of the United States, spanning 80 countries.

SmartPros: PCAOB Concludes First International Auditor Regulatory Institute

The PCAOB revised Auditing Standard No. 2 mainly for small companies’ benefit. But large companies tell the regulator the new AS5 will also reduce their audit costs.

The revised auditing standard for internal control over financial reporting could bring cheaper auditing bills for large companies. Some publicly traded companies are estimating that their audit fees could be reduced by 10 percent if the proposed rule is adopted by the Public Company Accounting Oversight Board, Laura Phillips, the regulator’s deputy chief auditor, said on Friday.

Much of the focus on the revisions to Auditing Standard No. 2 has been how it can be made scalable for the 6,000 so-called non-accelerated filers that have yet to comply with the Sarbanes-Oxley Act. Those publicly traded companies with a public float of $75 million or less don’t have to have their auditor attestation reports completed until their 10-Ks are filed for fiscal years ending after December 15, 2008.

CFO.com: AS5 Could Trim Audit Bills by 10%