FEI Committees Respond to SEC and PCAOB Section 404 Guidance

February 26, 2007

FEI Summary

On Feb. 26, 2007, FEI responded to the U.S. Securities and Exchange Commission (SEC) and Public Company Accounting Oversight Board (PCAOB) proposed guidance and standards related to the implementation of Section 404 of the Sarbanes Oxley Act.

FEI’s Committee on Corporate Reporting (CCR) and its Small Public Company Task Force (SPCTF) both provided comments to the agencies in this matter. Specifically, the committees responded to the SEC’s proposed interpretive guidance for management regarding its evaluation of internal control over financial reporting and related rule amendments, and the PCAOB’s proposed auditing standards, An Audit of Internal Control Over Financial Reporting That is Integrated with An Audit of Financial Statements, and Considering and Using the Work of Others in an Audit.

Overall, the two committees supported the efforts of the SEC and the PCAOB in developing the proposed guidance and standards. They indicated that the proposals open the door for productive dialogue between auditors and their clients regarding how to make management’s assessments and the internal control audit more efficient. The committees did, however, separately voice concerns regarding the critical need for the management guidance and external audit standards to be aligned. As well as noting that in order for companies to implement the proposed SEC management guidance successfully and in alignment with their external auditors, the auditors must be assured that the inspection practices of the PCAOB will align with the proposed auditing standards.

Additional concerns were included in the letters which can be accessed below:

FEI CCR and SPCTF comments to the SEC
 

FEI CCR and SPCTF comments to the PCAOB

Access FEI's press release of February 26, 2007

Prepared Feb. 26, 2007 by Christine DiFabio (cdifabio@FinancialExecutives.org), Director of Technical Activities, Financial Executives International (FEI). This summary does not represent FEI opinion unless specifically noted above.