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The Securities and Exchange Commission announced it will hold an open meeting on April 4 to discuss the Public Company Accounting Oversight Board’s proposed auditing standard for Section 404 of the Sarbanes-Oxley Act and the coordination of that proposed standard with the SEC’s related pending proposal to provide guidance for management of public companies implementing Section 404.

Both proposals were published for public comment in December 2006, and the comment periods for both proposals ended on Feb. 26, 2007.

The open meeting represents a continuation of the process announced in May 2006 by the Commission and the PCAOB to improve the reliability of financial statements public companies file with the SEC while making compliance with Section 404 more efficient and cost effective.

As part of this process, the SEC has proposed management guidance for Section 404 compliance designed to focus attention on those internal controls that present the greatest risk for a material financial misstatement. At the same time, as a companion to the proposed SEC guidance, the PCAOB has proposed a thoroughgoing revision of its existing standard for Section 404 audits.

SmartPros: SEC Schedules Open Meeting to Discuss 404 Changes

Commission announced it will hold an open meeting on April 4, to discuss the Public Company Accounting Oversight Board’s proposed auditing standard for Section 404 of the Sarbanes-Oxley Act and the coordination of the proposed changes with the SEC’s own guidance concerning implementation.

Both proposals were published for public comment in December 2006, with the comment period ending for both on Feb. 26.

In May 2006, the SEC and the PCAOB pledged to make compliance with Sarbanes-Oxley’s internal control provisions more efficient and cost effective for public companies of all sizes.

WebCPA: SEC Schedules Meeting to Discuss 404 Changes

Judge Dismisses Lawsuit Challenging Constitutionality of Accounting Oversight Board

A lobbyist for big business on Wednesday vowed to continue challenging the constitutionality of a 2002 anti-fraud law after a federal judge dismissed a lawsuit the group brought against the independent board Congress created to oversee the accounting industry.

The Free Enterprise Fund, which filed the suit in February 2006, argued that the Public Company Accounting Oversight Board violates the Constitution’s mandated separation of powers among the three federal branches because its five members are not appointed by the president, cannot be removed by him and Congress does not control the board’s budget.

But U.S. District Court Judge James Robertson wrote in a 14-page opinion that granted summary judgment in favor of the board that “the plaintiffs have brought a facial challenge to the PCAOB, presenting nothing but an hypothetical scenario of an overzealous or rogue PCAOB investigator.”

Yahoo.com: Judge Dismisses Sarbanes-Oxley Lawsuit

South Korea’s Financial Supervisory Commission, or FSC, said Tuesday it has signed a pact with a U.S. accounting body for joint inspection and investigation of Korean accounting firms that audit local companies listed on the U.S. bourses.

The agreement with the Public Company Accounting Oversight Board, or PCAOB, was spurred by the Sarbanes-Oxley Act in the U.S., which requires all accounting firms auditing corporations publicly traded in U.S. markets to register with the board and to undergo its inspections regularly, according to a statement by the FSC.

Morningstar.com: S Korea FSC, US Accounting Body Agree On Joint Watch On Accounting Cos

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 move to principles-based accounting raises concerns; paid sick time may become mandatory; the DoJ looks at private-equity ‘’clubs'’; Six Sigma gets bad press; a medical-records database alarms privacy experts; and more.

Even before President Bush told an enthusiastic Wall Street audience in January that “we don’t need to change the [Sarbanes-Oxley] law, we need to change the way the law is implemented,” the Public Company Accounting Oversight Board (PCAOB) was taking steps to do precisely that. But as it advances an openly “principles-based” approach in replacing Auditing Standard No. 2 with Auditing Standard No. 5, some question whether the new standard is doomed to fail unless associated laws and practices also change.

In an effort to make the auditing of internal controls more efficient, the new AS #5 would no longer require auditors to offer an opinion on management’s evaluation of internal controls. It would instruct auditors to cover the areas of greatest risk, rather than obliging them to visit the majority of operations, and also permit them to rely on previous audits rather than start from scratch each year.

cfo.com: Standard vs. Practices

Does the PCAOB’s proposed replacement for Auditing Standard No. 2 offer too much leeway for professional judgment?

With just a few days until the comment period ends, the Public Company Accounting Oversight Board got an earful from its advisory board on Thursday about the new standard for auditors’ attestation of corporate internal controls. In a nutshell, the corporate executives and accounting experts questioned whether the more-flexible standard will lead to less-effective audits.

The PCAOB is attempting to simplify its most-contentious auditor guideline, Auditing Standard No. 2, in response to concerns in the business community that audits under the Sarbanes-Oxley Act have become too onerous and costly. The proposed standard — commonly referred to by the board as AS5 — encourages auditors to take a “top down, risk-based approach” by focusing on only those areas in which a material weakness could lead to a misstatement.

cfo.com: AS5: More Flexible, Less Effective?

Today Senators John Kerry (D-Mass.) and Olympia J. Snowe (R-Maine) called for a delayed implementation of the Sarbanes-Oxley Section 404 requirements for small public firms to ease the burden on complying with the expected new auditing standards. Section 404 requires firms to establish internal control frameworks and to file internal control reports. The Securities and Exchange Commission (SEC) and the Public Company Accounting Oversight Board (PCAOB) proposed rules and guidance late last year addressing this section and are accepting public comments through Monday, February 26th.

“We can have strong corporate accountability standards while also reducing the burden for small firms who spend more time and money earned than big companies to comply with Sarbanes-Oxley,” said Kerry. “We must do everything possible to appropriately reduce red tape in order for small firms to grow and become dynamic public companies.”

Yahoo!: Kerry, Snowe Urge Sarbanes-Oxley Extension for Small Firms

Commissioner Paul Atkins delivered a speech at the Corporate Directors Forum and as usual, unleashed himself on one of his favorite topics: Section 404 of the Sarbanes-Oxley Act. Atkins, like the Paulson Committee and Bloomberg/Schumer, worried about the U.S. markets’ place in the world rather than investor information - as if the two were mutually exclusive.

His speech contained the usual complaints about the “costs” of 404. (As if there are no costs to investors or the economy as a whole for audit failures.) He cited in particular the costs incurred for compliance procedures performed by firms that were subsequently ignored by auditors. Seems like the answer is to make the auditors snap to attention, not gut the rules.While the PCAOB and the SEC continue to revise Auditing Standard No. 2, it’s good to note that their efforts aren’t wasted on Commission Atkins:

“I think almost all players in this debate have recognized the flawed approach that was initially rolled out. Last month, the SEC proposed additional guidance for management’s assessment of internal control. Around the same time, the PCAOB proposed replacing AS 2 with a new audit standard, AS 5, for an outside auditor’s attestation of internal controls. Far from being a rollback or lessening of standards, I think the new proposals go a long way toward implementing the original vision of Sarbanes-Oxley. I look forward to seeing the comments on these proposals.”

yahoo!finance: Atkins: Still Wailing On Sarbanes-Oxley’s 404

On the SEC site, see spotlight on Internal Control Reporting Provisions, which includes the SEC’s proposed guidance, “Management Reporting on Internal Control Over Financial Reporting”.

This is the first guidance from the SEC directed specifically toward management, and intended to be applied in context with the newly released draft auditing standard (AS5) published by the PCAOB this week.

Inside Sarbanes-Oxlex:SEC Publishes Guidance to Management