SEC Announces Next Steps for Sarbanes-Oxley Implementation


Washington, D.C., May 17, 2006 - The Securities and Exchange Commission today announced a series of actions it intends to take to improve the implementation of the Section 404 internal control requirements of the Sarbanes-Oxley Act of 2002.

The actions the Commission intends to take include issuing SEC guidance for companies and working with the Public Company Accounting Oversight Board (PCAOB) on revisions of its internal control auditing standard. These actions are based on extensive analysis and commentary in recent months from investors, companies, auditors, and others. The expected actions will also include SEC inspections of PCAOB efforts to improve Section 404 oversight and a brief further postponement of the Section 404 requirements for the smallest company filers, although ultimately all public companies will be required to comply with the internal control reporting requirements of Section 404.

"The steps we are announcing today are designed to further improve the reliability of financial statements and to better protect investors while making the Section 404 process more efficient and cost effective," said SEC Chairman Christopher Cox. "As we go forward, we will consider the special concerns of all companies that fall under our jurisdiction -- large and small, foreign and domestic. By providing practical guidance to companies, by working with the Public Company Accounting Oversight Board on their forthcoming revised standard for auditors, and by examining how the PCAOB inspection process is succeeding in increasing the efficiency and cost-effectiveness of the audit process, we will take a giant step toward 'getting it right' when it comes to Section 404 compliance."

In recent months, the Commission has obtained comment from a variety of sources concerning the operation and effects of Section 404, including:

"The actions the Commission is announcing today represent key steps toward addressing issues raised by participants involved in the critical process of reporting to investors on the effectiveness of companies' internal control over financial reporting," said John White, Director of the Commission's Division of Corporation Finance. "We will be working on our own, and with the PCAOB, to improve the implementation of Section 404 so that it will work efficiently and effectively for companies and auditors of all sizes and types while still maintaining the important investor protections it provides."

The actions the Commission expects to take include:

The Commission is also taking this opportunity to express again its appreciation to its Advisory Committee on Smaller Public Companies for their significant efforts and valuable contributions to the Commission's work, both with regard to Section 404 and other issues affecting smaller companies.

For additional information, please contact John Nester, SEC Office of Public Affairs, at (202) 551-4120.

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