Thursday, June 21, 2007
On June 20, the SEC issued interpretive guidance, unanimously approved on May 23, to help public companies strengthen their internal control over financial reporting while reducing unnecessary costs, particularly at smaller companies. The new guidance will enhance compliance under Section 404 of the Sarbanes-Oxley Act of 2002 by focusing company management on the internal controls that best protect against the risk of a material financial misstatement. The SEC also issued final rule amendments providing that a company that performs an evaluation of internal control in accordance with the interpretive guidance satisfies the annual evaluation required by Exchange Act Rules 13a-15(c) and 15d-15(c), defining the term "material weakness," and revising the requirements regarding the auditor's attestation report on the effectiveness of internal control over financial reporting. The Commission also issued a release requesting comment on a proposed definition of the term significant deficiency."