By: Cydney Posner

The SEC has issued a press release advising that it intends to host a roundtable discussion, some time in April 2005, about the experiences of companies and auditors under SOX 404, internal controls. For the most part, the press release focuses on the importance of internal controls, signaling that any hoped-for liberalization of the internal control requirements will be a difficult uphill battle. However, there was one positive note in the press release, which effectively confirms that prior suggestions of a delay in the implementation deadline for foreign issuers and small issuers is virtually a done deal.

In the press release, the SEC Chairman said, "The benefits of 404 reports are too important not to do it right. An appropriate delay for these issuers might be desirable if, by waiting for smaller companies to have better guidance [from a COSO task force] and for foreign private issuers to work through conversion to IFRS [international financial reporting standards], it achieves more effective implementation of the internal control reporting requirements. I have asked the staff to consider recommending to the Commission an appropriate delay." Donald Nicolaisen, SEC Chief Accountant, added, "If a delay is provided, these companies should use the time to continue documenting and testing their internal controls. The requirement to report on internal controls will not go away and, if the staff does recommend a delay, we expect that it will be the last time that we do so."

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