The Securities and Exchange Commission has approved the Public Company Accounting Oversight Board's new internal control auditing standard, known as AS5, by a 5-0 vote.
Registered audit firms are now required to use the new standard for all audits of internal controls no later than for fiscal years ending on or after Nov. 15, 2007. Auditing Standard No. 5 replaces the older Auditing Standard No. 2.
The new standard implements Sections 103 and 404 of the Sarbanes-Oxley Act, but takes a less costly approach than the older standard. Companies had complained that Section 404 audits had been too rigorous and led to high fees. AS5 takes more of a risk-based approach than the older standard to make the audit work more efficiently. The PCAOB adopted AS5 in May.
The SEC also moved a step closer to allowing companies to file their financial statements using International Financial Reporting Standards. The commission voted 5-0 on a proposal to publish a paper that would look at the future of IFRS in the United States and seek outside comment on it.
In other SEC news, the commission charged former KLA-Tencor CEO Kenneth L. Schroeder with fraud for improper stock options backdating, and it charged ConAgra Foods in a financial fraud and accounting case. ConAgra agreed to pay $45 million to settle the charges, which included the misuse of corporate reserves to manipulate reported earnings in fiscal year 1999, and a scheme at its former subsidiary, United Agri-Products, in 2000 that involved premature revenue recognition.
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