SEC Update 1887

  • The SEC said a while back that they would be issuing new guidance on SOX 404 ICOFR process on December 13. However, today’s release stated that guidance would now be issued in the next 7-10 days. It is my guess that this will be issued concurrently with the PCAOB guidance due out next Tuesday.
    I guess that we get to wait just a bit longer to see what they have to say about ICOFR. :roll: :roll:

  • I would agree, although I have a feeling that what we will get on Tuesday are further proposals with no decisions. ( note: the PCAOB announced last week that they were ‘…proposing to consider…’ superceeding AS2
    I expect that any additional guidance that is received will come from a new Audit standard, but that it may be next summer before a documented standard is published.

  • I agree too…the standard protocol…a decision by indecision.

  • I also saw an interview by Christopher Cox, SEC chair, who stated that the ‘SOX 404 controls are adding more expense to stock prices than they’re saving in protecting against the fraudulent activities’ (quote may not be exact). As we know in the arena of politics, there’s a ‘gaap’ (pun intended) between ‘saying and doing’ 😉
    No www needed - please paste to browser cox
    ‘The SEC is moving in the right direction by trying to ease compliance requirements with Section 404 of the Sarbanes-Oxley law that unnecessarily burden public companies without providing adequate benefit,’ the pro-business U.S. Chamber of Commerce said in a statement.

  • This link provides the best overall update of forthcoming changes so far (e.g., what was approved and what’s ‘in the works’:

  • The SEC stated that it was not their intention for filers to look to the PCAOB for guidance. However, since that has become common practice, they’ve decided to work closely with the PCAOB in drafting this new guidance. Seems odd to me that they’d wait this long to release guidance. They have known for years that the ambiguity of the law has been its biggest problem.
    Anyway, I’m certainly looking forward to reading this new guidance.

  • I’m not familiar with this concept of a principles based approach (per Resources Global Professionals). How does that differ to a risk based approach?
    Also will not requiring auditors to assess how companies review their controls yet still make their own assessment of the effectiveness of these controls (per Bloomberg) have any real impact in terms of time, effort and cost?

  • Also will not requiring auditors to assess how companies review their controls yet still make their own assessment of the effectiveness of these controls (per Bloomberg) have any real impact in terms of time, effort and cost?
    According to our auditors initial reaction, the answer is no. We will really have to wait and see what the PCAOB has to say about how auditors approach this before we will know for certain.[/quote]

  • I would also say that the cost effect appears to be nil.
    My company currently has an exemption from auditor attestation for 2006, but certification is still required.
    Based on what they have done within their interim audit, I would say that they are still reviewing and testing the SOX work performed by management in similar detail to what would be done if the exemption did not exist.
    I get the feeling that they are doing this because they still feel that they have a liability.

  • So it has now been a month since the proposals came out. Has anyone had the time to evaluate these proposals and the potential impact on their current approach (or have we all been embroiled in 2006 sign offs.)?

  • Hi WL - No major changes, as revising legislature is a slow process in the USA. Sometimes no news is good news, although some of the promised relief and clarifications might be promising. Below are restrictive news and blog searches where some promising links or information might appear:
    NEWS – Paste to browser - no www needed
    BLOGS – Paste to browser - no www needed

  • Cheers Harry. Having read the SEC and PCAOB documents I was suitably underwhelmed and wondered if I was missing anything (all seemed to me to focus on auditors and small companies). Also a little frustrated over the absence of any meaningful comment at the moment given all the noise being made by the two opposing camps before these revisions were issued.

  • Hi all,
    Have a look at [url][/url].
    There was an article posted yesterday evaluation whether or not AS5 is going to provide any real value.
    As for the SEC feedback in relation to guidance for management - i wouldn’t say that any of their press releases to date provide any official guidance to management.
    Without any guidance, it looks like we are all still at the mercy of our externals and PCAOB audit standards…

  • I am still busy wrapping up 2006 SOX work. However, with that winding down, I am getting a chance to start thinking about how I will look at our controls testing work in 2007. I am participating in a couple of web meetings this week covering the new ‘proposed’ guidance. It will be interesting to see what the feedback is from KPMG ( and from a mixed group of industry leaders (controllers roundtable).
    My personal take on this is that my company will not necessarily scale back efforts, but rather re-direct them such that we are testing the riskier areas (close process, spreadsheets, judgemental reserves, stock options, etc.) heavier and the low-risk areas (routine, daily transactions) much lighter. We will have more freedom in our documentation of processes and related controls since our auditors will not be providing an opinion on our documentation and assessment process.
    I too was looking for more concrete examples that I could point to and use as support to reduce our work in some areas, but I do understand that each business is operated differently and, therefore, similar controls will impact each business differently such that they need to be looked at in aggregate and not individually.
    If I see anything jump off of the page at me during the presentations this week, I’ll share my observations with the forum.

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