Subsidiary now in scope 1838
violasrbest last edited by
We have jiust heard that our auditors have decided that one of our subsidiaries in in scope for 2006 because of an acquisition made mid-year. Is there a timeframe for SOXing a sub that has just come into scope, because our year end is 31st December? There is no chance of us doing the necessary in 8 weeks.
EMM last edited by
Unfortunately, it would still be in scope at this stage, as all scoping must be based on your year-end results.
THis means that many organisatons have to constantly re-scope their entities based on updated forecasting in order to keep an eye on such a risk.
I would recommend that you discuss with your auditors the best way of implementing whatever you can. I may be wrong here as it is a while since we discussed the potential for something similar here which never arose, but there may be an opportunity to disclose that reliance of controls was based on the entitys Company Level Controls due to the late timing and the acquisition and re-scoping excercise.
Some-one else on this forum may be better equipped to advise?
kymike last edited by
Your auditors do not decide what is in or out of scope. Management makes those decisions.
Here is what the SEC has to say about current year acquisitions -
Q: If a registrant consummates a material purchase business2 combination during its fiscal year, must the internal control over financial reporting of the acquired business be included in management’s report on internal control over financial reporting for that fiscal year?
A: As discussed above, we would typically expect management’s report on internal control over financial reporting to include controls at all consolidated entities. However, we acknowledge that it might not always be possible to conduct an assessment of an acquired business’s internal control over financial reporting in the period between the consummation date and the date of management’s assessment. In such instances, we would not object to management referring in the report to a discussion in the registrant’s Form 10-K or 10-KSB regarding the scope of the assessment and to such disclosure noting that management excluded the acquired business from management’s report on internal control over financial reporting. If such a reference is made, however, management must identify the acquired business excluded and indicate the significance of the acquired business to the registrant’s consolidated financial statements. Notwithstanding management’s exclusion of an acquired business’s internal controls from its annual assessment, a registrant must disclose any material change to its internal control over financial reporting due to the acquisition pursuant to Exchange Act Rule 13a-15(d) or 15d-15(d), whichever applies (also refer to the last two sentences in the answer to question 9). In addition, the period in which management may omit an assessment of an acquired business’s internal control over financial reporting from its assessment of the registrant’s internal control may not extend beyond one year from the date of acquisition, nor may such assessment be omitted from more than one annual management report on internal control over financial reporting.
Denis last edited by
Your auditors do not decide what is in or out of scope. Management makes those decisions .
Take note. This cannot be said too loud nor too often.
WrightLot last edited by
Agreed but that’s not totally true is it? Management must drive the scoping process but if it decides that something is not in scope and the auditors do not agree and believe it should be then they would fail the company because the management assessment process is insufficient.
Denis last edited by
Yes, but that’s different. What you refer to is the auditors expressing an opinion on what you have done - which is their job.