SEC Approves PCAOB Auditing Standard on Reporting on the Elimination of a Material Weakness

The Public Company Accounting Oversight Board announced today that the Securities and Exchange Commission has approved PCAOB Auditing Standard No. 4, which would apply when auditors report on whether a previously reported material weakness in a company’s internal control over financial reporting continues to exist as of a date specified by management.

“Investors and issuers told the Board that this standard would provide assurance that public companies are working to address issues identified during the assessment of the companies’ internal control,” said Acting PCAOB Chairman Bill Gradison. “The SEC’s approval of this standard demonstrates that the Commission and the Board are responsive to the interests of investors, issuers and auditors.”

The PCAOB will issue a clear and concise outline of the affirmative audit steps set forth in Auditing Standard No. 4, as discussed in the Commission’s order.

The standard, adopted by the Board on July 26, 2005, establishes a stand-alone engagement that is entirely voluntary, performed only at the company's request, after the company has disclosed a material weakness in internal control under Section 404 of the Sarbanes-Oxley Act.

The Commission’s order includes a discussion of how company management might disclose reports by management and auditors on whether a previously reported material weakness continues to exist.

The SEC’s order approving the auditing standard is available on the SEC’s Web site. The text of Auditing Standard No. 4 can be found under Rulemaking on the Board’s Web site at www.pcaobus.org.