A flurry of e-mails and letters arrived just under the deadline for the Public Company Accounting Oversight Board’s 70-day comment period regarding proposed changes to the audit standard on internal controls over financial reporting.
Just before Christmas, the five-member board unanimously voted to circulate a proposal that would trim the amount of testing required for auditors to evaluate internal controls over the financial reporting process.
Through the weekend, the board had received 55 comment letters, and that total nearly doubled before the close of business Monday. By the day’s end, a total of 97 pieces of correspondence had been posted to the PCAOB’s Web site. The majority of the nearly 700 pages of comments were highly detailed in citing the specifics of what a number of organizations and individuals supported in the board’s proposal, as well as possible improvements that could be made to the guidance.
Broadly-speaking, many of the comments fell into two camps, similar to the views expressed during a recent meeting of the board’s Standing Advisory Group, and, for that matter, in the four years since passage of the Sarbanes-Oxley Act. Investor advocates worry that more leeway in the controls could lead to lax audits, while business concerns -- such as the U.S. Chamber of Commerce -- worry that still not enough has been done to tailor the original guidance to make it manageable, and cost efficient, for smaller companies.
Among notable accounting groups offering their thoughts were:
- The Institute of Management Accountants;
- The Council of Institutional Investors;
- The Center for Audit Quality;
- The American Accounting Association;
- Financial Executives International;
- The Committee on Capital Markets Regulation; and,
- The Small Business Administration.
The North Carolina State Board of CPA Examiners, the New York State Society of CPAs and the Texas Society of CPAs represented the only input offered by state CPA groups, while Deloitte, KPMG and McGladrey & Pullen LLP were alone among the larger accounting firms submitting comment by the close of the day Monday.The Committee of Sponsoring Organizations of the Treadway Commission did submit comment, though mostly to offer that it will release its own exposure draft on how to better define the monitoring of internal controls sometime in late March.
Also among the comments was a letter from Sens. John Kerry, D-Mass., and Olympia Snowe, R-Maine, specifically asking for another one-year delay in requiring smaller public companies to comply with internal control provisions. The senators wrote that extending the compliance date for management assessments of internal controls until 2008, along with deferring an auditor's attestation until 2009 annual reports, would make it much easier for small businesses to make the transition and at the same time allow for some field testing of the new guidance.
The comment letters, in their entirety, are available at www.pcaob.org/Rules/Docket_021/Comments/all.pdf.
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