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SEC Approves PCAOB Auditing Standard No. 5 Regarding Audits of Internal Control Over Financial Reporting; Adopts Definition of "Significant Deficiency"
Washington, D.C. - The Securities and Exchange Commission voted unanimously in favor of a new auditing standard and other measures to increase the accuracy of financial reports while reducing unnecessary costs, especially for smaller public companies.
The Commission expects the new auditing standard, in combination with the Commission's new management guidance, will make Section 404 audits and management evaluations more risk-based and scalable to company size and complexity.
"In approving Auditing Standard No. 5, the Commission has strengthened investor protection by refocusing resources on what truly matters to the integrity of financial statements. This is an exceptionally positive step for both investors and for America's capital markets," said SEC Chairman Christopher Cox. "This standard and the Commission's interpretive guidance for management represent the culmination of two years' work by the Commission and the PCAOB and our respective staffs to make the implementation of Section 404 more effective and efficient. I want to thank everyone involved for their hard work in responding to and addressing the concerns created by the unduly expensive and inefficient Auditing Standard No. 2."
The Commission unanimously approved the Public Company Accounting Oversight Board's (PCAOB) proposed Auditing Standard No. 5, An Audit of Internal Control Over Financial Reporting That is Integrated With An Audit of Financial Statements (Auditing Standard No. 5), a related independence rule, and conforming amendments (File No. PCAOB-2007-02). The Commission also adopted a definition of the term "significant deficiency."
For the rest of this article please visit www.sec.gov.
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