Magazine article Information Management

SEC Tries to Simplify SOX Compliance

Magazine article Information Management

SEC Tries to Simplify SOX Compliance

Article excerpt


Companies and Congress have urged the Securities and Exchange Commission (SEC) to provide clear compliance guidelines for Section 404 of the Sarbanes-Oxley Act of 2002 (SOX).

The commission recently announced it will issue guidance for companies and work with the Public Company Accounting Oversight Board (PCAOB) to revise its internal control auditing standard. It also will inspect PCAOB efforts to improve Section 404 oversight and further postpone the Section 404 requirements for small companies, although ultimately all public companies will be required to comply with Section 404's internal control reporting requirements.

"As we go forward, we will consider the special concerns of all companies that fall under our jurisdiction--large and small, foreign and domestic" said SEC Chairman Christopher Cox. "By providing practical guidance to companies, by working with the PCAOB on their forthcoming revised standard for auditors, and by examining how the PCAOB inspection process is succeeding in increasing the efficiency and cost-effectiveness of the audit process, we will take a giant step toward 'getting it right' when it comes to Section 404 compliance."

The SEC said it would take the following actions:

Guidance for Companies.

Many public companies have asked the SEC for further clarity on how management may complete its required assessment of internal controls. To prepare for the issuance of a management guidance, the SEC will

* Issue a concept release and opportunity for public comment. The SEC will solicit views on the management assessment process to ensure that the guidance addresses the needs and concerns of all public companies. The SEC also plans to seek input on the appropriate role of outside auditors in connection with the management assessment required by Section 404(a), and on the manner in which outside auditors provide the attestation required by Section 404(b), to help come up with possible alternatives to the current approach.

* Consider additional guidance from COSO. The SEC said forthcoming guidance from the Committee of Sponsoring Organizations of the Treadway Commission (COSO) will help organizations better understand and apply the control framework related to internal control over financial reporting. As the SEC develops guidance for management on how to assess its internal control over financial reporting, it will consider the extent to which the COSO guidance is useful to smaller public companies in completing Section 404(a) assessments. …

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