With a new roadmap to help companies obey the Sarbanes-Oxley Act now in hand and compliance deadlines for non-accelerated filers officially set, the task of evaluating and reporting the effectiveness of internal controls should be a vastly different experience for the legions of small companies now preparing to comply with Section 404 for the first time, auditing experts say.
On Dec. 13, the Securities and Exchange Commission finally gave Corporate America what it has craved for more than two years: proposed new guidance to help companies understand how they should document and test internal controls over financial reporting, as required by Section 404. The new rules would allow smaller companies to focus only on the controls needed to address the risk of material misstatements in their financial statements by scaling their evaluations and procedures to their circumstances. The guidance emphasizes principles, rather than rules, and eliminates a separate auditor opinion on management’s assessment.
