Business advisors Grant Thornton LLP have applauded the SEC and the PCAOB for
their efforts in addressing the legitimate concerns of the capital markets while
still reinforcing the value of Sarbanes-Oxley to investors.
"We believe that the new guidance and auditing standards strike an appropriate
balance between efficiency and effectiveness, though it will take time to fully
realize the effects," the company said in a statement.
It added: "We believe that the current efforts of the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) will help organizations more
efficiently monitor the effectiveness of their internal control systems throughout
the year. COSO recently commissioned Grant Thornton LLP to develop guidance
- scheduled for completion in early 2008 - that will include in-depth guidance
for implementing the monitoring component of COSO's Internal Control —
Integrated Framework."
A public discussion document regarding this guidance should be available in
June 2007.
Last week, the Securities and Exchange Commission unanimously approved interpretative
guidance to help public companies strengthen their internal control over financial
reporting while reducing unnecessary costs, particularly at smaller companies.
The new guidance will enhance compliance under Section 404 of the Sarbanes-Oxley
Act of 2002 by focusing company management on the internal controls that best
protect against the risk of a material financial misstatement.
“Congress never intended that the 404 process should become inflexible,
burdensome, and wasteful. The objective of Section 404 is to provide meaningful
disclosure to investors about the effectiveness of a company’s internal
controls systems, without creating unnecessary compliance burdens or wasting
shareholder resources,” explained SEC Chairman Christopher Cox.
The Commission also approved rule amendments providing that a company which
performs an evaluation of internal control in accordance with the interpretive
guidance satisfies the annual evaluation required by Exchange Act Rules 13a-15
and 15d-15. The Commission additionally amended its rules to define the term
“material weakness” as “a deficiency, or combination of deficiencies,
in internal control over financial reporting, such that there is a reasonable
possibility that a material misstatement of the company's annual or interim
financial statements will not be prevented or detected on a timely basis”.
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