Shedding Light on Internal Control Requirements

February 2007 from Crowe Chizek – “Near the end of 2006, the U.S. Securities and Exchange Commission (SEC) and the Public Company Accounting Oversight Board (PCAOB) took steps towards making significant changes in how the internal control provisions of the Sarbanes-Oxley Act of 2002 (SOX) are applied…”

180 View - The article discusses the history, problems, and potential changes to SOX. The PCAOB had invited comments on the proposed changes and the deadline for response has just passed. We could not find much yet about the responses except for the following:

February 27, 2007 from webCPA – “A flurry of e-mails and letters arrived just under the deadline for the Public Company Accounting Oversight Board’s 70-day comment period regarding proposed changes to the audit standard on internal controls over financial reporting.

Just before Christmas, the five-member board unanimously voted to circulate a proposal that would trim the amount of testing required for auditors to evaluate internal controls over the financial reporting process.

Through the weekend, the board had received 55 comment letters, and that total nearly doubled before the close of business Monday. By the day’s end, a total of 97 pieces of correspondence had been posted to the PCAOB’s Web site. The majority of the nearly 700 pages of comments were highly detailed in citing the specifics of what a number of organizations and individuals supported in the board’s proposal, as well as possible improvements that could be made to the guidance.

Broadly-speaking, many of the comments fell into two camps, similar to the views expressed during a recent meeting of the board’s Standing Advisory Group, and, for that matter, in the four years since passage of the Sarbanes-Oxley Act. Investor advocates worry that more leeway in the controls could lead to lax audits, while business concerns -- such as the U.S. Chamber of Commerce -- worry that still not enough has been done to tailor the original guidance to make it manageable, and cost efficient, for smaller companies...”