Compliance Blog

Wow. Sitting in on today's SEC roundtable on "Second-year experiences with Internal Control Reporting and Auditing Provisions" (i.e. Section 404 of the Sarbanes-Oxley Act of 2002) you get the feeling everyone needs "guidance." I'm not talking about guidance counseling, but that is a thought. 83 times the term "guidance" was used primarily with respect to improving the real gap that exists between Audit Standard 2 (used by the audit community as the touchstone for their internal control audit processes) and the May 16, 2005 "guidance" issued by the PCAOB and the SEC with respect to using more judgement, increasing reliance on management's testing work, and more emphasis on top down/risk-based audits. An undercurrent sentiment is that the audit firms are, or have been put, into a bit of a Jekyll and Hyde situation where the "May 16th guidance" (which has not been incorporated into AS2) should improve the efficiency and cost of the audits (the Jekyll part), is being trumped by more stringent and costly behavior (the Hyde part) when it actually comes to the audit.

Today's panel members were largely in agreement that not only should the May 16th guidance be incorporated into AS2, but also that management needs its own ... (wait for it!) guidance for undertaking its assessment of internal controls over financial reporting.

Check our next blog posting later today for a quick overview of the day's discussion and other highlights.