Sarbanes-Oxley Reform – Who is driving this debate ?
Sarbanes-Oxley reform has been front page news for the past several months and will continue to dominate headlines in the foreseeable future. With all of the official and semi-official governing bodies issuing reports in the November/December time frame this post will attempt to drive some clarity around the who’s and what’s of all of this Sarbanes-Oxley reform conversation.
Who are the players in the Sarbanes-Oxley debate:
US Congress: The US Congress passed the Sarbanes-Oxley law in 2002. Section 404 of the Sarbanes-Oxley act (which is only 174 words long) provided the requirement that internal controls must be audited. Section 404 is very vague in specific guidance regarding on what organizations really need to do. There has been talk of Congress changing the law, but that will not be discussed until Congress is in session in early 2007.
SEC: The SEC provides specific rules and guidance on what companies specifically have to do as it relates to Sarbanes-Oxley. The SEC has been reforming the rules over the past 2 years. On December 13, 2006, the SEC will propose for public comment interpretive guidance for managements regarding their evaluations of internal control over financial reporting and proposed amendments to SEC rules.
PCAOB: The PCAOB is a private-sector, non-profit corporation, created by the Sarbanes-Oxley Act, to oversee the auditors of public companies. The PCAOB sets the rules and standards for external auditors as it relates to how and what they audit for those companies subject to the Sarbanes-Oxley act. The PCAOB has planned to issue guidance to Audit Standard 2 on December 19th, 2006.
Committee on Capital Market Reform: The Committee on Capital Markets Reform is an independent, bipartisan committee composed of 22 corporate and financial leaders from the investor community, business, finance, law, accounting, and academia. They have no rule-setting or law making function. This group is an influencing group – with the Secretary of the Treasury as strong charging leader
Christopher Cox: Christopher Cox is the 28th Chairman of the Securities and Exchange Commission. He was appointed by President Bush on June 2, 2005, and unanimously confirmed by the Senate on July 29, 2005. Christopher Cox has been aggressively pursuing reforms to SOX over the past 18 months.
Hank Pauslon: Hank is the United States Treasury Secretary. He was nominated by U.S. President George W. Bush to succeed John Snow as the Treasury Secretary on May 30, 2006. On June 28, 2006, he was confirmed by the United States Senate to serve in the position. As the former CEO of Goldman Sachs, Hank has been pressing for Sarbanes-Oxley reform with the motive of improving the competitiveness of the United States public capital markets and removing unnecessary burdens
The Recommendation Reports – What and When:
12/05/2006 - Committee on Capital Markets - Interim Report of the Committee on Capital Market Regulation
12/13/2006 - SEC Votes to Propose Interpretive Guidance for Management to Improve Sarbanes-Oxley 404 Implementation. The full report has yet to be posted
12/19/2006 – The PCAOB will issue reforms to Audit Standard 2
For each of the above items, the process will be for a period of public comment and discussion prior to final rulings and conclusions. You can expect that the first three months of 2007 will be very active in the continued debate of Sarbanes-Oxley reform.
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