SEC and PCAOB Host Public Roundtable on Internal Control

The internal control rules under section 404 of the Sarbanes-Oxley Act of 2002 have been in place for two years in the United States and have generated more controversy than any other corporate governance reform. The Securities and Exchange Commission and the Public Company Accounting Oversight Board hosted a public roundtable on May 10, 2006 to get feedback from market participants, including officers and directors of public companies, audit committee members, institutional investors, public accountants, governance experts and lawyers.

Most of the roundtable participants expressed the belief that the internal control rules, while enormously costly, have been beneficial in increasing accountability for financial reporting and in boosting investor confidence in the U.S. capital markets. On the other hand, implementing the rules has not been an unqualified success because management and auditors are still sometimes being unnecessarily cautious—for example, by overtesting low-level