Washington (May 28, 2003) -- The Securities and Exchange Commission adopted a rule Tuesday requiring corporate executives -- and their accountants -- to note in annual reports whether companies have proper internal controls in place to prevent financial wrongdoing.

The SEC voted unanimously to force chief executives to comment on the effectiveness of their companies' internal controls and procedures for reliable financial reporting. It also forces outside auditors to attest to the adequacy of the internal controls.

"If you're a senior officer of a public company, then accurate reporting is one of your most important jobs and you shouldn't take it lightly," said Commissioner Cynthia Glassman.

"Effective internal controls are the best defense against fraudulent reporting.  That is why the AICPA has for years strongly advocated internal control reporting by management, and we applaud the SEC for taking this step today," said James O'Malley, the American Institute of CPAs' senior vice president for public affairs.

“We look forward to the PCAOB providing guidance to auditors on assessing management’s evaluation of internal controls through the issuance of an attest standard for public company independent auditors," he added. "Independent audit firms will need timely guidance to meet these new reporting requirements.

-- Tracey Miller-Segarra

Register or login for access to this item and much more

All Accounting Today content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access