Wednesday, October 7, 2009

More On: Sarbox 404b For Small Cos, AS5

We reported recently on the PCAOB's issuance of its '4010' report on inspection results on the implementation of AS5, its revised standard on internal control audits (replacing AS2), and on the SEC's announcement last week of a final delay of the implementation date for small co's (i..e. 'nonaccelerated filers,' generally defined as public co's with less than $75 million market cap) to file their first auditor's reports on internal control (performed in accordance with PCAOB's AS5), as required under Sarbanes-Oxley Section 404b. (Sarbox Section 404a requires a Management Report on internal control, which small co's already provide.

Large co's have been providing the Management report and auditors report on internal control for a few years already, and declines in costs have been reported; however the subject of overall cost-benefit to small co's was the subject of discussion, and a number of extensions of time for further study by the SEC, given the element of fixed cost that appeared to be associated with the 404b audit of internal control in particular.

The SEC announced this final delay in 404b for small co's (delaying to annual reports filed for fiscal years ending on or after June 15, 2010) as part of their announcement of the release of their study of the costs and benefits of reporting under Sarbanes-Oxley Section 404. The study was undertaken in part to examine any improvement to the cost-benefit equation arising from implementation of PCAOB's AS5 (replacing AS2) on the auditor's report on internal control, and the SEC's updated rules on the management report on internal control.

Further Reading
Some valuable follow-on reporting on these recent SEC and PCAOB developments can be found in the following posts by these bloggers: (they receive some interesting comments on many of their posts as well):

Auditing Standard 5: How Now Brown Cow? Oct. 3, by Francine McKenna, in her blog, Re: The Auditors.

S-OX 404b for Nonaccelerated Filers: A Political Crime Waiting to Happen, Oct. 5 by Prof. Tom Selling, in his blog, The Accounting Onion.

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1 comment:

Bad Credit Motorcycle Loans said...

Well, this is interesting. We can wait until June 2010 to see the results. I think this is going to make a well-defined structure for all.