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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

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%

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

The Securities and Exchange Commission on Wednesday threw its weight behind finalising fresh guidelines aimed at clarifying how companies and auditors should comply with the Sarbanes-Oxley law.

The move signals that work by the US authorities to ease the burden of compliance with the 2002 law is moving into its final stage three months after proposed revisions were first floated.

At issue is how the SEC’s new guidelines for company management on implementing the law’s Section 404 internal controls provisions can be more closely aligned with separate guidance for auditors issued by the Public Company Accounting Oversight Board (PCAOB).

There is also disagreement over the extent to which external auditors should rely on a company’s own reviews of its controls.

This is testing US regulators’ willingness to adopt a more flexible, “principles-based” approach to corporate controls than those prescribed under Sarbox.

FT.com: SEC pushes clearer Sarbox guidelines

New legislation recently introduced in the US Senate aims to ensure that Sarbanes-Oxley Act regulations due to take effect in June do not disproportionately impact the nation’s small businesses.

The Small Business Regulatory Review Act of 2007 would require the Securities and Exchange Commission (SEC) and Public Company Accounting Oversight Board (PCAOB) to take into account the burdens of small businesses before issuing final Sarbanes-Oxley rules.

Provisions in the Small Business Regulatory Review Act of 2007 would require: the SEC to conduct a small business analysis before the SEC and PCAOB publish final rules on small business internal control compliance; the SEC to publish a small business compliance guide explaining the SEC’s final rules in non-technical language; and the Government Accountability Office to assess the impact of the SEC’s final rules on small public companies two years after they are published.

“The Small Business Regulatory Review Act of 2007 will help to ensure that small stock companies do not suffer from additional unintended consequences that harm their ability to compete, innovate, grow, and, most importantly, create jobs,” stated Olympia J. Snowe (R-ME), Senate Small Business and Entrepreneurship Committee Ranking Member, who introduced the bill. “Our nation’s small stock companies are the cornerstone of our entrepreneurial economy, and it is essential that we carefully address the regulatory barriers that impede their growth.”

Investorsoffshore: Snowe Bill To Mitigate Sarbanes-Oxley Impact On US Small Firms

As the SEC and PCAOB continue to revise their internal-control standards, what should small businesses do in the meantime? A few are asking senators for an extension.

More than 6,000 public companies face a serious dilemma about their Sarbanes-Oxley compliance: Should they use the current version of Section 404 now in reviewing internal controls over their financial reporting? Or should they wait until the Securities and Exchange Commission and Public Company Accounting Oversight Board issue final revisions later this year?

Decision time is approaching fast. Small businesses — or so-called non-accelerated filers — have until they file their 10-Ks for fiscal years that end on or after Dec. 15, 2007, to meet 404’s management assessment requirement. It’s a deadline that the SEC has extended several times, including that of the auditors’ attestation reports (non-accelerated filers don’t have to complete those documents until their 10-Ks are filed for fiscal years ending after December 15, 2008). And small-business advocates are hoping the SEC will extend those dates once again.

CFO.com: Could Small Biz Get Another Sarbox Reprieve?

Richard Wasielewski, Nortech Systems, Inc. (NASDAQ:NSYS) vice president and chief financial officer, testified Wednesday before a U.S. Senate Committee on Small Business and Entrepreneurship that Sarbanes-Oxley (SOX) regulatory requirements have both helped Nortech improve its internal controls and financial reporting practices but also that the new requirements have added considerably to the company’s costs.

Wasielewski appeared before the committee at the invitation of U.S. Senator Norm Coleman (R-Minn.), to address the significant time and money small public companies, such as Nortech Systems, invest in Sarbanes-Oxley compliance.

The hearing preceded the introduction of new legislation, The Small Business Regulatory Review Act of 2007 (S.1153), the following day by Senate Small Business and Entrepreneurship Committee Ranking Member Olympia J. Snowe (R-ME) and Senator Coleman. The new legislation would require the Securities and Exchange Commission (SEC) and Public Company Accounting Oversight Board (PCAOB) to take into account the burdens faced by small businesses before issuing final Sarbanes-Oxley rules and ensure that SOX regulations due in June 2007 do not disproportionately impact the nation’s small publicly traded companies

Broadcast Newsroom: Nortech Systems’ CFO Testifies on Sarbanes-Oxley Reform

Securities and Exchange Commission Chairman Christopher Cox isn’t ruling out further delays in applying stricter accounting requirements on small public companies but said such relief isn’t the option preferred by regulators.

About 6,000 smaller public companies have yet to come under two requirements adopted by Congress in 2002 as part of the Sarbanes-Oxley Act, calling for companies to make an annual assessment of their internal financial-reporting controls, with further review by the company’s outside auditor. Regulators have delayed applying that portion of the law to smaller companies amid complaints that compliance has been very costly and time-consuming for larger companies. In response to such complaints, the SEC and Public Company Accounting Oversight Board are working to make the requirement less burdensome for all companies.

SmartPros: SEC Chairman: Sarbanes-Oxley Relief for Small Firms Not First Choice