SEC Issues Concept Release on Section 404 Management Guidance
July 11, 2006
FEI Summary
On July 11th the U.S. Securities and Exchange Commission (SEC) issued its much-anticipated Concept Release regarding management guidance on Sarbanes-Oxley Section 404. As outlined in the release, the SEC currently anticipates that the final guidance will take the form of an SEC rule and at a minimum will address the following topics:
· risk and control identification,
· management’s evaluation, and
· documentation requirements.
The SEC also indicated that any modifications to Auditing Standard No. 2 (AS2) would be consistent with the final rule. Additionally, any future guidance issued will be scalable and responsive to individual circumstances. The Concept Release includes 35 questions focused in the three areas indicated above.
Following its May 10, 2006, Roundtable devoted to Sarbanes-Oxley Section 404 implementation issues, the SEC issued a roadmap for improvements entitled "Next Steps for Sarbanes-Oxley Implementation" (Access the FEI summary of that announcement.) The issuance of the Concept Release is one of the milestones on that roadmap, and it brings the SEC one step closer to issuing guidance for management that has been lacking since the law was enacted in 2002.
Public comment on the release is requested by 60 days after the posting in the public register. The press release can be accessed here and the Concept Release can be accessed here.
Prepared July 11, 2006 by Christine DiFabio (cdifabio@FinancialExecutives.org) Director, Technical Activities, Financial Executives International (FEI). This summary does not represent FEI opinion, unless specifically noted above.