Insurance Journal reports that the Securities and Exchange Commission agreed yesterday to changes in Sarbanes-Oxley section 404 (and the accompanying auditing standards promulgated by the Public Company Accounting Oversight Board) that will make internal controls compliance less burdensome on smaller companies.
The open meeting was the latest in a series between the SEC and the PCAOB as they work to balance compliance cost reduction with the investor safeguards that Sarbanes-Oxley created. The SEC has pressured the PCAOB to allow auditors to perform less independent testing and rely more on the input of company executives. The PCAOB, on the other hand, fears that doing so would give dishonest insiders "free reign." According to a Washington Post piece published before the meeting, "the dispute over the scope of Section 404 is shaping up as the most important skirmish so far in a sweeping deregulatory campaign."
The PCAOB is expected to submit its standards for SEC approval by late May or early June so that the SEC can approve them quickly -- in time for audits of 2007 financial statements.