Governance: USA imposes reporting re internal controls

In a statement issued 3 October, the SEC said "under the provisions of Section 404 of the Sarbanes-Oxley Act, public companies and their independent auditors are each required to report to the public on the effectiveness of a company’s internal controls. The smallest public companies with a public float below USD75 million have been given extra time to design, implement and document these internal controls before their auditors are required to attest to the effectiveness of these controls."

While the reporting and auditor-attestation grew out of the 2002 law passed by Congress, all U.S. public companies have been required to maintain internal accounting controls since 1977.

“Since there will be no further Commission extensions, it is important for all public companies and their auditors to act with deliberate speed to move toward full Section 404 compliance,” said SEC Chairman Mary L. Schapiro.

The extension of time will expire beginning with the annual reports of companies with fiscal years ending on or after 15 June, 2010. This expiry date previously had been for fiscal years ending on or after 15 Dec. 2009. The extension was granted so that the SEC’s Office of Economic Analysis could complete a study of whether additional guidance provided to company managers and auditors in 2007 was effective in reducing the costs of compliance.

Because the study was published less than three months before the 15 December deadline, the Commission determined that additional time is appropriate and reasonable so that small public companies and their auditors can better plan for the required auditor attestation.