Effective internal control over financial reporting is intended to provide reasonable assurance about the reliability of a company's financial statements and the process of preparation of those statements.
Section 404 of the Sarbanes-Oxley Act, as amended by the Dodd-Frank Act, requires management of all companies to assess and report on the effectiveness of the company's internal control over its financial reporting. The law also requires that independent auditors for larger companies attest to management's disclosures about the effectiveness of that internal control. Under the amendments to SOX by the Dodd-Frank Act, certain smaller companies, known as "non-accelerated filers," are exempted from the requirement for an external audit of internal control over financial reporting. However, these smaller companies, which typically have common equity held by non-insiders of less than $75 million, must still provide annually management’s assessment of internal controls.
Below are links to some key documents on this topic.
- PCAOB Issues Report on First Year of Implementation of Auditing Standard No. 5 (Sept. 24, 2009)
- PCAOB Publishes Staff Guidance on Auditing Internal Control Over Financial Reporting in Smaller Public Companies (Jan. 23, 2009)
- PCAOB’s New Audit Standard for Internal Control over Financial Reporting is Approved by the SEC (July 25, 2007)
- Board Approves New Audit Standard for Internal Control Over Financial Reporting and, separately, Recommendations on Inspection Frequency Rule (May 24, 2007)
- Board Issues Second-Year Report on Auditors’ Implementation of Internal Control Standard (April 18, 2007)
- Board Proposes Revised Auditing Standard on Internal Control over Financial Reporting (Dec. 19, 2006)
- Board Announces Four-Point Plan to Improve Implementation of Internal Control Reporting Requirements (May 17, 2006)
- Board Issues Statement Regarding 2006 Inspections (May 1, 2006)
- Board Issues Report on Initial Implementation of Auditing Standard No. 2 (Nov. 30, 2005)
- Board Adopts Standard on Remediation of Material Weaknesses, Rules on Auditor Independence and Tax Services (July 26, 2005)
- PCAOB Issues Guidance on Audits of Internal Control (May 16, 2005)