The Public Company Accounting Oversight Board issued a report saying that while the initial implementation of Sarbanes-Oxley and, specifically, Section 404, has not been without its challenges, the board is confident the process will be easier in the future.
The board said that both firms and issuers "faced enormous challenges in the first year of implementation, including strains on available resources; a shortage of staff with prior training and experience in designing, evaluating, and testing controls; and the limited timeframe that issuers and auditors had to implement Section 404." The report also said that those challenges were made worse by companies whose internal control systems has been neglected in recent years.
"While our inspections identified several opportunities for auditors to improve audit quality and efficiency, the board remains confident that auditors will be able to perform more effective and efficient audits in future years," said PCAOB Chairman William J. McDonough, who, as announced, stepped down from his post on Nov. 30. "These improvements are already appearing as auditors and their clients gain experience and as challenges that were unique to the first year's implementation abate."
The report is based on information received during inspection audits that the board performed in 2005. The 19-page report is available at www.pcaob.com, and lays out a number of suggestions for the work of auditors in the future.
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