After much criticism and debate over the best approach to regulating business, in December the Public Company Accounting Oversight Board proposed a new audit standard for Sarbanes-Oxley Section 404 implementation.Concurrently, the Securities and Exchange Commission introduced interpretive guidance for management's assessment of internal control. Both exposure drafts, which solicited feedback through February, promise change through a risk-based approach.

The changes seem like a good idea in theory, and the Institute of Management Accountants applauds the SEC and the PCAOB for making a move in the right direction. Upon taking a closer look at the drafts, however, they continue to be problematic: Businesses still have no practical guidance on how to implement a risk-based framework. Despite their best attempts, the SEC and the PCAOB would, in effect, be perpetuating a regulatory regime with high cost and massive inefficiency, without significantly improving investor protection.

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