Client Alert
Internal Control Over Financial Reporting: SEC Adopts Interpretive Guidance And PCAOB Adopts New Auditing Standard
August 31, 2007
Earlier this summer, the SEC adopted final interpretive guidance that is intended to assist company management with performing its required assessment of internal control over financial reporting and amended existing SEC rules to reflect certain aspects of the interpretive guidance. The guidance emphasizes scalability in focusing on the design and operation of controls tailored to a company's specific size, complexity and industry. The amendments to the SEC rules require, among other things, that auditors directly state whether the registrant maintained, in all material respects, effective internal control over financial reporting. Finally, in an effort to harmonize standards for auditors and management, the SEC adopted the PCAOB's Auditing Standard No. 5, which, among other things, aligns the PCAOB's key definitions with those of the SEC. Collectively, these recent changes are expected to enable public companies to carry out the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 more efficiently and cost-effectively.
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