Tuesday, June 5, 2007
Excerpt from Testimony Concerning Section 404 of the Sarbanes-Oxley Act and Small Business by Chairman Christopher Cox, U.S. Securities & Exchange Commission, Before the Committee on Small Business, U.S. House of Representatives, June 5, 2007:
It is our intention that the SEC's new 404 guidance for management and the PCAOB's new AS 5 will work together to clearly delineate the company's responsibility for the methods and procedures it uses in its internal controls evaluation process, on the one hand, and the auditor's responsibility for opining on management's assessment, on the other hand. In combination, the Commission's guidance and the PCAOB's new auditing standard should result in management using a top-down, risked-based approach to its evaluation of internal controls. And they should shift discussions between managers and auditors away from management's evaluation process to what matters most to investors — the risk that material misstatements in the company's financials won't be prevented or detected in a timely manner.