Since the third edition of Frequently Asked Questions Regarding Section 404 of Protiviti’s Guide to the Sarbanes-Oxley Act series was released in August of 2004, much has happened.
For example:
- The U.S. SEC has created a “large accelerated filer” category and has adopted different deadlines for initial Section 404 compliance for accelerated foreign private issuer filers and non-accelerated U.S. domestic issuer and foreign private issuer filers. In addition, the deadline for initial compliance with Section 404(b) requiring an attestation report has been delayed an additional year for accelerated foreign private issuer filers and non-accelerated U.S. domestic issuer and foreign private issuer filers. As this publication went to print, the SEC Commissioner announced his intention to propose an additional one-year delay for the external auditor’s attestation under Section 404(b) related to smaller public companies. Finally, the Commission provided additional time for newly public companies to comply with Section 404.
- There have been two joint roundtables conducted by the SEC and the PCAOB on the implementation of the internal control provisions of the Sarbanes-Oxley Act of 2002 (SOX).
- The SEC has issued interpretive guidance to management for conducting the assessment process required by Section 404.
- The PCAOB has issued Auditing Standard No. 5 to incorporate guidance the PCAOB staff released in response to the 2005 roundtable as well as make the attestation process more cost-effective. This new standard superseded the controversial Auditing Standard No. 2.
- COSO has issued further guidance on the use of its Internal Control – Integrated Framework, particularly by smaller companies.
While the above list does not include everything that has occurred, it certainly is enough to warrant an updated fourth edition of this publication.
This publication is designed to help answer your questions about the sections of Sarbanes-Oxley pertaining to public reporting without your having to wade through material you already know. This information will assist Section 404 project sponsors, leaders and team members within your organization. For readers of prior editions of this publication, new and substantially revised questions have been flagged. The questions listed in this publication are ones that have arisen in our discussions with clients, attorneys, auditors and others in the marketplace who are dealing with these requirements. We have provided responses and points of view based on our experience that we hope will assist companies as they document, evaluate and improve their internal control over financial reporting, and as they continue to enhance their executive certification process. We have also held discussions from time-to-time with both the SEC and PCAOB staff to understand their views on key points and confirm our interpretations in certain areas.
This fourth edition considers the SEC’s interpretive guidance to management and incorporates the PCAOB’s major revisions to Auditing Standard No. 2. It includes questions directed to foreign filers and U.S. domestic non-accelerated filers and is updated for lessons learned since publication of the third edition. It also incorporates responses to frequently asked questions that both the SEC and PCAOB staff have published through the date of this book.
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