SEC proposed guidance to Management on their report on Internal Controls over Financial Reporting
U.S. Security Exchange Commission (SEC) announced their proposed interpretation and rules for Management on their annual report on Internal Controls over Financial Reporting (ICoFR). This 71 page, double-spaced report requires a “lawyer” review. The SEC interpretation covers:
A. The Evaluation Process
1. Identifying Financial Reporting Risks and Controls
2. Evaluating Evidence of the Operating Effectiveness of ICoFR
3. Multiple Location Considerations
B. Reporting Considerations
1. Evaluation of Control Deficiencies
2. Expression of Assessment of Effectiveness of ICoFR by Management and the Registered Public Accounting Firm
3. Disclosures about Material Weaknesses
4. Impact of a Restatement of Previously Issued Financial Statements on Management’s Report on ICoFR
5. Inability to Assess Certain Aspects of ICoFR
The proposed SEC Rule states that, although there are many different ways to conduct an evaluation of the effectiveness of ICoFR to meet the SOX rule, an evaluation conducted in accordance with the (above) SEC interpretive guidance would satisfy the annual management evaluation required by those rules.
SEC requests and encourages any interested parties to submit comments on the proposed interpretive guidance by 26-Feb-07. I expect ASQ will contribute comments on behalf of its members. As the proposed guidance and rule will make it easier for quality and environmental managers, engineering, and auditors to assist their management in assessing ICoFR.
