Board Approves Standard for Audits of Internal Control, July 19 Registration Deadline for Non-U.S. Firms

The Public Company Accounting Oversight Board today approved an auditing standard for audits of internal control over financial reporting and proposed amendments to the Board’s existing interim auditing standards to conform them to the new standard.

The Board also voted to change the registration deadline for non-U.S. accounting firms from the previous deadline of April 19 to July 19, 2004.

The auditing standard, "An Audit of Internal Control Over Financial Reporting Performed in Conjunction with an Audit of Financial Statements," addresses both the work that is required to audit internal control over financial reporting and the relationship of that audit to the audit of the financial statements.

Section 404(a) of the Sarbanes-Oxley Act of 2002, and the Securities and Exchange Commission's related implementing rules, requires the management of a public company to assess the effectiveness of the company's internal control over financial reporting. Section 404(b) of the Act, as well as Section 103, directed the PCAOB to establish professional standards governing the independent auditor's attestation, and reporting, on management's assessment of the effectiveness of internal control.

The text of the auditing standard and related appendices can be found on the Board’s Web site under Rulemaking at www.pcaobus.org.

The Board also approved amendments to its bylaws, including one that would require the Board to hold at least one public meeting per calendar quarter.

The bylaw amendments also modify portions of the indemnification provisions of the current PCAOB bylaws to clarify (i) the types of costs and expenses for which the PCAOB will provide indemnification; (ii) the manner in which the Board may determine whether indemnification is to be provided; (iii) the right of the Board to undertake an individual’s defense in lieu of payment of indemnification, and other matters.

The auditing standard on internal control, the change in the registration date for non-U.S. firms and the bylaw amendments will be submitted to the Securities and Exchange Commission for approval, as required by the Sarbanes-Oxley Act.

The archived webcast of the meeting can be found here.