SOX Box Ticking Slammed By SEC And PCAOB
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Compliance and auditing costs related to the Sarbanes-Oxley Act can be significantly reduced. According to the SEC this can be accomplished without amending the legislation. Both the Public Company Accounting Oversight Board (PCAOB) and the Securities and Exchange Commission (SEC) have issued guidance for companies and auditors. Ever since the legislation came into force companies have complained about the high costs of compliance. In particular "section 404". Public companies and their auditors have to attest to the effectiveness of their internal controls in relation to financial reporting. The aim is to improve the accuracy of reports and to prevent fraud. The advice from both organisations centres on increasing the effectiveness of reviews and audits. The documents follow on from a roundtable discussion at the SEC and numerous studies. Most CEOs broadly support the Act, however complain about the costs. The most common complaint seems to be auditors and reviewers who insist on checking every control, irrespective of the impact on financial reporting. The SEC/PCAOB advice is to focus on controls where weaknesses could lead to errors in accounting. Management and auditors "must bring reasoned judgment and a top-down risk based approach to the 404 compliance process." Auditors are warned, "a one-size-fits-all, bottom-up, check-the-box approach that treats all companies equally is less likely to improve financial controls and financial reporting a reasoned, good faith exercise of professional judgment focused on reasonable, as opposed to absolute assurance." The PCAOB document An Audit of Internal Control Over Financial Reporting Performed In Conjunction With An Audit Of Financial Statements is here.
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Similar Areas Selected Books Keywords internal controls and financial reporting Securities and Exchange Commission Public Company Accounting Oversight Board
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