Video- Eliminate the external auditor's opinion of management's assessment of internal controls.
- Reduce dependence on initialing and dating of documents as proof that a control was effective.
- Raise the threshold of what constitutes a significant deficiency and provide a bright-line test.
- Allow rotational testing—say, three years for manual controls or five or more for IT systems, if they have not changed.
- Allow interim testing throughout the year.
- Change or reinterpret independence rules to allow auditors to give more guidance to clients.
- Allow external auditors to rely more on the work of internal auditors.
- Create a tiered compliance system, and base it on the number of employees or asset size rather than market cap.
Other Suggestions:
- Allow costs associated with 404 to be capitalized.
- Allow management to choose not to correct a significant deficiency, without automatically elevating it to a material weakness.
- To avoid the equivalent of an internal 404 effort on a quarterly basis, specify that the quarterly certifications required by Section 302 need only certify to any changes in disclosure controls and procedures — or allow CEOs and CFOs to certify "to best knowledge and belief."
- Extend the one-year grace period for testing controls of acquired companies to other major changes, such as bringing an outsourced procedure back in-house.
Source: SEC comment letters submitted in advance of April 13 Roundtable on Section 404.
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