Securities and Exchange Commission Issues Guidance on Management's Evaluation of Internal Control Over Financial Reporting

By Daniel Fisher
October 01, 2007
The Securities and Exchange Commission (SEC) recently issued interpretative guidance (“Guidance”) in connection with corporate management’s evaluation of internal control over financial reporting (“ICFR”), which is required for under Section 404 of the Sarbanes-Oxley Act of 2002 (“SOX 404”) for companies required to file reports under the Securities and Exchange Act of 1934. The Guidance is part of a combined effort by the SEC and the Public Company Accounting Oversight Board (PCAOB)—which recently adopted a new auditing standard relating to audits of ICFR—to address the growing criticism that the costs of compliance with SOX 404 far exceed the benefits. The Guidance is intended to make the ICFR evaluation process more efficient and cost-effective, and is designed to apply to companies of varying sizes and complexities....