The Financial Times reports: The Securities and Exchange Commission last week threw its weight behind finalizing fresh guidelines aimed at clarifying how companies and auditors should comply with the Sarbanes-Oxley law.
The move signals that work by the US authorities to ease the burden of compliance with the 2002 law is moving into its final stage three months after proposed revisions were first floated.
At issue is how the SEC’s new guidelines for company management on implementing the law’s Section 404 internal controls provisions can be more closely aligned with separate guidance for auditors issued by the Public Company Accounting Oversight Board (PCAOB).
There is also disagreement over the extent to which external auditors should rely on a company’s own reviews of its controls.
This is testing US regulators’ willingness to adopt a more flexible, “principles-based” approach to corporate controls than those prescribed under Sarbox.
Some critics argue that giving companies and auditors more latitude in judging potential accounting risks undermines the rationale for the legislation, passed in the wake of the Enron and WorldCom scandals.
Roel Campos, an SEC commissioner, said: “We should never take for granted that this dichotomy is totally understood.”