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The debate over new Section 404 guidelines begins... The number of issuers downgraded to junk inches higher...

WILL CRITICS BE SATISFIED?Now that regulators have released their proposals for overhauling compliance guidelines for Section 404 of the Sarbanes-Oxley Act, the real work begins ...

By Staff Writer | Updated on January 01, 2007

WILL CRITICS BE SATISFIED?Now that regulators have released their proposals for overhauling compliance guidelines for Section 404 of the Sarbanes-Oxley Act, the real work begins as auditors, consultants and corporate executives pore over the details during the comment periods. Following years of complaints about excessive compliance costs and redundant testing, the Securities and Exchange Commission (SEC) and the Public Company Accounting Oversight Board (PCAOB) are finally tackling the problems by issuing both new guidance for company executives and a revised rule for auditors. But will the changes bring sufficient relief from high audit costs?

James Clendenen, engagement director for the risk and consulting section of Parson Consulting, contends that the vast majority of his clients already use the top-down, risk-based approach to their 404 assessments that the SEC is calling for in its new guidance. “It is beneficial in that it will allow companies to look to the SEC for guidance in how it performs its management assessment, but I don’t think it’s going to be a dramatic decrease in cost or workload,” says Clendenen. The SEC had not issued the final written guidance at press time.

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