• The SEC Proposes to Extend for One Year the Compliance Date for the Auditor Attestation Requirement Applicable to Smaller Reporting Companies
  • February 11, 2008 | Author: C. Alex Frutos
  • Law Firm: Jackson Walker L.L.P. - Dallas Office
  • In another move by the Securities and Exchange Commission (the SEC) to help reduce costs of internal controls compliance for smaller reporting companies, on February 1, 2008, the SEC proposed to amend temporary rules that were published in December 21, 2006.

    In June and July 2007, the SEC issued new guidance and new rules issued relating to Section 404 compliance.   These rules were adopted with the express purpose of increasing audit efficiency and reducing audit costs by facilitating more effective and efficient evaluations of internal control over financial reporting by management and auditors.

    The SEC has launched a study regarding the costs and benefits of companies currently complying with Section 404 under newly-issued guidance for companies and auditors. The SEC’s proposed postponement for smaller reporting companies would allow time for completion of the study and to take into account its findings before smaller reporting companies would be required to comply with the auditor attestation requirements.

     

    2 to include in their annual reports, pursuant to rules implementing Section 404(b) of the Sarbanes-Oxley Act of 2002, an attestation report of their independent auditor on internal control over financial reporting for fiscal years ending on or after December 15, 2008. The SEC’s proposed amendments delay that requirement for one year to fiscal years ending on or after December 15, 2009.

    3  All public companies, including smaller reporting companies, will file their first Section 404(a) management reports using the SEC’s guidance this year.  At the same time, the SEC and the Public Company Accounting Oversight Board approved Auditing Standard No. 5, An Audit of Internal Control Over Financial Reporting that is Integrated with an Audit of Financial Statements, with the intention of making the Section 404(b) auditor attestation requirement more cost effective.

    4  Large accelerated filers and accelerated filers are now filing their first Section 404(b) auditor attestation reports under the new audit standard.

    1 These temporary rules currently require issuers that are smaller reporting companies