Proposal to help US companies with compliance
The US Public Company Accounting Oversight Board issued a standard yesterday that could help companies convince investors of the strength of their financial controls, without having to call in the auditors for a full report.
The proposal, if approved by the SEC, would enable companies to bring in auditors to test specific financial controls, rather than a company's entire control environment. This would make it far cheaper and easier to reassure investors.
Companies would also be able to bring in auditors and report on their findings at any time of the year, helping to reassure investors in a far more timely fashion. At the moment under Section 404 of Sarbanes-Oxley auditors attest to a clients' key financial controls just once a year, in what are called 10-K filings.
It would solve the problem of a company that claims to have rectified a problem but cannot get any outside verification, and so continues to be tainted with that material weakness until annual auditing comes around again the next year.