Currently the act states that a company’s auditor has to sign off a statement of the management’s assessment of internal controls. The large accounting firms think that this could lead investors to believe that the auditors have actually tested the controls themselves. Any future restatement of earnings could then damage the reputation of the firm.
Companies on the other hand are already facing a huge increase in costs as the try to cope with the demands of checking internal control systems and are worried that the new laws could also lead to a massive increase in auditor fees.
The Public Company Accountancy Oversight Board is planning to offer detailed rules on the subject in the hope of settling the dispute in the next couple of months, according to the FT.