Report on SEC Roundtable & PCAOB Proposed Standard
On April 13, the SEC hosted a roundtable discussion on Sarbanes-Oxley 404 that included Chairman William Donaldson and the Commissioners of the SEC, Chairman William McDonough and the senior staff of the PCAOB and a wide variety of industry participants. The purpose of the roundtable was to discuss the experiences of registrants, accounting firms and others in implementing Sarbanes-Oxley internal control provisions.
The participants in the SEC Roundtable commented that Sarbanes Oxley has helped to restore confidence in the capital markets by increasing transparency and increasing the level of Board involvement within public companies. However, participants did comment that the initial cost of complying with the new internal control provisions was more costly than anticipated, but many expect costs to decrease next year. Also, the participants generally agreed that control testing should be more focused on those controls that cause the greatest risk and that duplicative testing should be eliminated.
Many of the participants agreed that because all weaknesses are being reported in the same manner, it would be important to have qualifiers or plain English language that would explain the reported weaknesses. In addition, there were requests from the industry participants to have additional audit guidance from the PCAOB. In response, Chairman William McDonough announced that the PCAOB has recently proposed an auditing standard that would establish requirements and provide direction for auditors in reporting on the elimination of material weaknesses in a company's internal control over financial reporting.
The proposed PCAOB standard is open for public comment until May 16, 2005. After the close of the comment period, the Board will determine whether to adopt a final standard, with or without amendments. Any final standard adopted will be submitted to the Securities and Exchange Commission for approval.
Please click on the following links to read more on the PCAOB proposal and the SEC Roundtable: