In search of a happy medium for the smaller public companies that have loudly complained about the cost of audits of their internal controls, Securities and Exchange Commission Chairman Christopher Cox said a new auditing standard is on the way.According to published reports, Cox said that he has been in regular contact with the chairman of the Public Company Accounting Oversight Board to develop and propose the auditing standard. Right now, Cox said that the timetable would be for the SEC to hopefully approve the standard by the spring.
Cox said that the goal of the rule would be to focus auditor attention on the areas of greatest risk for a company. He did say that every company would still be subject to an audit, but wouldn't go so far as to speculate whether the new standard would translate to lower audit fees.
He also said that the SEC would likely stick to the size categories tha were proposed by the SEC's Small Business Advisory Committee - in the two years leading up to implementation, companies with market caps under $75 million will be required to evaluate their own internal controls, but not to have the results audited. Annual audits would be introduced in the third year, but, Cox said, those would probably focus on the "suitability of the design of internal controls," though auditors might have to go beyond those controls in the course of conducting the financial audit.
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