PCAOB may have something to say about 404(b)-like audits after all

Posted by Teresa Bockwoldt on July 18, 2010

In the wake of a potential Sarbanes-Oxley 404(b) exemption via the Wall Street Reform Act, the PCAOB seems to be doing what it can to require a deeper audit than previously accepted.  This is inline with what we at Vibato have also been seeing on the external audit side.  Most external auditors we encounter are claiming if the 404(b) reprieve goes through, or, if non-accelerated filers (those companies with a $75M or less market cap) are not required to comply with 404(b) (the section of Sarbanes-Oxley that requires external auditors to review management's internal controls), then they are planning to audit any 404(a) claim as though it were a 404(b) claim.  404(a) is where all public companies are required to attest to the effectiveness of their internal control infrastructure via their 10K, 10Q, and 302 / 906 certifications.  Here is the article from CFO.com about the PCAOB activities:

"PCAOB Ups Auditors' Double-Checking Duties

A proposed rule would expand the types of accounts that audit firms need to verify with a third party.

Sarah Johnson - CFO.com | USJuly 16, 2010

The Public Company Accounting Oversight Board has proposed a rule that could help uncover corporate fraudsters' common practice of masking the true amounts of accounts, such as receivables or cash balances.

The proposal updates a 15-year-old rule that governs audit confirmations — how auditors verify their clients' receivables with third parties, such as lenders and customers. The practice is "one of the building blocks of auditing," said PCAOB chairman Daniel Goelzer at a board meeting earlier this week. The board issued the proposal on Tuesday for a 60-day comment period."

Please click here to view the full article.

Tags: audit costs, Non-accelerated filer 404(b) information, Sarbanes-Oxley