SEC approves Sarbanes-Oxley changes for section 404 2058

  • While this is still subject to PCAOB and Congressional approval, passage of the proposed change appears promising according to the article. It’s good to see these changes coming to SOX 404: 🙂
    Please add www and paste to browser
    The U.S. Securities and Exchange Commission approved new guidance on Wednesday to help companies comply with what critics say is a burdensome and costly provision of the Sarbanes-Oxley corporate reform law. The agency, by a 5-0 vote, encouraged companies to take a more risk-based approach to complying with Section 404 of the legislation.
    ‘Congress never intended that the 404 process should become inflexible, burdensome and wasteful,’ SEC Chairman Christopher Cox said at the agency’s open meeting. Section 404 requires companies to assess their internal controls over financial reporting. It also calls for external auditors to report on management’s assessment and on the controls themselves.
    Corporations and business lobbyists have complained that Section 404 was too expensive and the SEC has conceded that, in some cases, overly cautious companies caused the law’s costs to exceed its benefits.
    The new guidance allows managers to identify the highest risks to their books as opposed to forcing them to test a long list of controls. The Public Company Accounting Oversight Board is expected to vote on Thursday in favor of revised guidance for auditors on a risk-based approach when assessing a company’s internal controls.

  • Does anyone know where I could find a copy of the final SEC guidance(as opposed to the proposed version)?
    I had a look on the SEC website but couldn’t find a copy

  • Hi EMM - Yes, I had researched the SEC site yesterday and nothing was available. However, this morning I found this update:
    Please paste to browser and add ‘www’
    The full text of the interpretive guidance and rules will be posted to the SEC Web site as soon as possible . The new auditing standard will be subject to Commission approval in the coming months after its adoption by the PCAOB and, if approved, is expected to be effective no later than for calendar year 2007 audits, with early adoption encouraged.

  • Thanks Harry.
    I haven’t managed to see it yet. I’m having problems accessing their site.
    Can you tell me if the link you have noted is a press release from the SEC or the actual document (which I believe, from amounts to 70 pages)?

  • The SOX link is only a brief one page press report and it’s noted on the SEC home page as a featured link.
    I also checked the PCAOB site and I may download the podcast tonight.
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    The meeting will be open to the public and will be Webcast via a link on the PCAOB’s Web site ( that will be made available on the day of the meeting. The open meeting also will be available via podcast later in the day .

  • Thanks Harry,
    Due to the 5 hour difference between Dublin Ireland and Washington, I 'll think I’ll give the podcast a miss myself.
    I see that they have already posted their announcement that the new standard has been approved. Must have only jsut been announced.

  • Yes, as EEM shares, the PCAOB just announced approval of the proposed changes to SOX 404 🙂
    Please add www and paste to browser
    Washington, DC, May 24, 2007 The Public Company Accounting Oversight Board today voted to adopt Auditing Standard No. 5 , An Audit of Internal Control Over Financial Reporting That Is Integrated with An Audit of Financial Statements, to replace its previous internal control auditing standard, Auditing Standard No. 2. The Board also adopted the related Rule 3525, Audit Committee Pre-Approval of Non-Audit Services Related to Internal Control Over Financial Reporting, and conforming amendments to certain of the Board’s other auditing standards.
    The auditing standard adopted by the Board today is principles-based. It is designed to increase the likelihood that material weaknesses in internal control will be found before they result in material misstatement of a company’s financial statements, and, at the same time, eliminate procedures that are unnecessary. The final standard also focuses the auditor on the procedures necessary to perform a high quality audit that is tailored to the company’s facts and circumstances. The Board worked closely with the Securities and Exchange Commission to coordinate Auditing Standard No. 5 with the guidance to public company management the SEC approved yesterday. A more detailed discussion of the new standard, and the changes that the Board made from the proposal, is attached.
    ‘The internal control reporting requirements of the Sarbanes Oxley Act are a key reason why the reliability and accuracy of financial reporting has improved over the past few years. The renewed confidence in financial reporting is critical for the health of our markets,’ said Mark Olson, PCAOB Chairman. ’ The new standard is more risk-based and scalable, which will better meet the needs of investors, public companies and auditors alike .’

  • Next Step is SEC final approval, rather than Congress
    I may have misread one of the articles which seemed to indicate the Senate Commerce Committee had to also approve these changes. It appears the final approval will be from the SEC (and this is expected). The effective date of implementation targeted for fiscal year 2008
    Please paste to browser and add www
    The PCAOB standard must go before the SEC for review and a vote . If the commission approves it, as expected, the revised standard will be on the books in time for audits to be done in 2008 of results for fiscal years ending on or after Nov. 15.
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    The final standard may be used by auditors immediately following SEC approval , and it, along with Rule 3525, and the conforming amendments, would be required for all audits of internal control for fiscal years ending on or after November 15, 2007 .

  • Numerous documents, including the full text of the proposed SOX 404 changes can be found at the PCAOB website
    Update from PCAOB website - Full Text of Proposed Changes
    Please copy to browser and add www
    The adopted standard and related documents are available on the Board’s Web site under Rulemaking Docket 21
    Rules Document #21 - Main Link For Full Text
    Please copy to browser and add www
    Key PDF files (1st 2 PDFs from main link above)
    PCAOB Release No. 2007-005: An Audit of Internal Control Over Financial Reporting That is Integrated With an Audit of Financial Statements and Related Independence Rule and Conforming Amendments
    Size=351KB … Please copy to browser and add www
    SEC Filing Form 19b-4
    Size=42MB - Please copy to browser and add www or download this huge PDF to your PC (see Technical Viewing Note below)
    Technical Viewing Note: Many of these PDFs are huge files and require a lengthy time to load. You might be better served to take larger PDFs (over 5 MB) and with a right mouse click to issue the ‘Save As’ command to save it in a folder (mine is called SOXDoc). Viewing standalone is a little faster than through the browser and you have a copy to work with as long as desired.

  • Hi Harry. I am having some trouble accessing the article. would appreciate if you could help me out with this. Thx

  • Hi Scottie - There’s at least one issue, where the Forbes and Washington Post articles (which were news feeds) have migrated offline.
    I’m using a new approach for URLs now, where the full address is shown but it doesn’t create a link outside the forums (which our site admin discourages). Please try copying the entire URL for these sites below … Be glad to help with additional ones if needed

    Reuters Article
    Key PCAOB announcement
    Current PCAOB News Developments
    Rulemaking Docket 021-and-#58; Auditing Standard An Audit of Internal Control Over Financial Reporting That is Integrated with an Audit of Financial Statements
    -and-#40;All PDFs can be found here-and-#41;

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