SOX Update: U.S. House and SEC

Extensions, amendments and new auditing standards for section 404

By Danielle Lee

The U.S. House of Representatives approved an amendment June 28 to an appropriations bill that would give smaller firms more time to comply with the internal controls of the Sarbanes-Oxley Act.

The amendment passed by a 267-154 vote.

If passed by the Senate and signed by President George W. Bush, the current deadline for small companies to start complying in their first fiscal year that ends on or after Dec. 15, 2007 would be extended to Sept. 30, 2008.

Additionally, July 25 the U.S. Securities and Exchange Commission approved a new auditing standard encouraging a less costly approach to Section 404 compliance.

The SEC’s Public Company Accounting Oversight Board's Auditing Standard No. 5 passed by a 5-0 vote and gives guidance on a more risk-based implementation of compliance.

This standard comes on the heels of new management guidance approved by the SEC in May calling for companies to scale their reviews to the size and complexity of their company, as well as focus on the controls most susceptible to misstatements.

The commission said this standard and set of guidelines will help smaller companies comply with Section 404, though calls from lawmakers for the commission to again delay the deadline for small company compliance are still being voiced.

SEC oversight will help ensure that audit firms are using these standards to achieve greater efficiency and cost reduction, according to Chairman Christopher Cox.