In a nod to opponents and critics who complained about the costs of internal controls audits, the Public Company Accounting Oversight Board last month voted unanimously to circulate a proposal that would scale down the amount of testing necessary to evaluate internal controls over the financial reporting process.The board's proposal, a rare regulatory about-face for a standard-setter, calls for replacing the PCAOB's existing Auditing Standard No. 2 with a new "principles-based" standard on internal control "designed to focus the auditor on the most important matters, increasing the likelihood that material weaknesses would be found before they cause material misstatement of the financial statements."

Under Sarbanes-Oxley Section 404, executives at publicly traded companies have been required to evaluate their internal controls and have them reviewed by their outside auditors. SEC issuers, particularly smaller companies, have complained that the process has been exorbitantly expensive and time-consuming.

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