SEC And PCAOB Reform And Harmonize SOX 404 Requirements

As anticipated, the Securities and Exchange Commission ("SEC") and the Public Company Accounting Oversight Board ("PCAOB") each has acted unanimously on outstanding proposals to reform and harmonize their guidance to public companies and public company auditors on compliance with the mandates of Section 404 of the Sarbanes-Oxley Act of 2002 ("SOX") for management assessments of internal control over financial reporting ("ICFR") and ICFR audits. The SEC acted in two areas—adopting guidance and related rule changes on management’s evaluation of ICFR and declining to extend further compliance dates for smaller and newly public companies. In a coordinated action taken one day later, the PCAOB adopted new Auditing Standard No. 5 ("AS No. 5") and rescinded Auditing Standard No. 2 ("AS No. 2"). The SEC guidance for the first time provides public company managements with instruction regarding SOX Section 404 compliance separate and apart from that provided by the PCAOB to auditors