Section 404 of the Sarbanes Oxley legislation requires management to attest to the effectiveness of their internal controls. Auditors must then give their opinion on management’s assessment and a second opinion on their assessment of the controls in place.
But Cynthia Glassman, SEC member, told the FT: ‘What I am concerned about, and have been concerned about since the adoption of the PCAOB rule, is that the focus has shifted away from senior management’s perspective on how they ensure their internal controls are operating the way they should, to an auditor’s perspective on the effectiveness of the controls. This seems to be turning into a very expensive ‘check the box’ exercise.’
The SEC and the PCAOB are due to meet to discuss section 404 of the Act in April.
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