The Public Company Accounting Oversight Board announced a four-point plan to improve auditors' implementation of the internal control reporting provisions of the Sarbanes-Oxley Act.
"During the past year, we have heard nearly unanimous agreement that effective controls of a public company's system of financial reporting protect investors," said acting PCAOB chairman Bill Gradison, in a statement. "We have also heard, however, that some refinements to the existing requirements would reduce the costs associated with internal control reporting while maintaining the benefits to investors."
The plan comes as the Securities and Exchange Commission begins consideration of a proposal to scrap many of SOX's provisions for small public companies, and the board prepares to battle a lawsuit questioning its legality under the U.S. Consitution.
The four initiatives outlined by the PCAOB include:
- Making amendments to Auditing Standard No. 2, which calls for an audit of internal controls to be held in conjunction with an audit of financial statements. The board said that it will consider amendments ensuring that auditors' focus remains on areas that pose higher risk of fraud or material error.
- Reinforcing the need for auditor efficiency during PCAOB inspections, a point already announced by the PCAOB in early May.
- Creating better guidance and education for auditors of small companies.
- Continuing PCAOB forums on auditing in the small business environment. Eight of the forums, which are attended by auditors, directors and financial officers of smaller public companies, are planned for 2006.
"Now that many companies have had two years of experience implementing the act's internal control reporting requirements, the board is in a good position to evaluate how to make the auditor's involvement as efficient as possible, without sacrificing the benefits we have already begun to see," Gradison said. "To promote the long-term sustainability of the internal control reporting process, we will work to eliminate costs that are unnecessary to achieving those benefits."The full plan, as well as other possible amendments to Auditing Standard No. 2, are available on the PCAOB's Web site, at www.pcaob.net.
Previously on WebCPA:
Regulators Agree Some SOX Changes Needed (May 11, 2006)
Next Inspections to Focus on 404 Costs, Efficiency (May 03, 2006)
SEC Advisory Member: SOX Revisions Remain on Table (April 13, 2006)
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