The 404 Debate

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The continuing controversy over internal-control reporting rules — Section 404 of the Sarbanes-Oxley Act — came to a head on May 10, 2006, when the Securities and Exchange Commission and the Public Company Accounting Oversight Board held a second roundtable to examine the experiences of companies that had just completed their second year of compliance. In the weeks leading up to the event, studies suggested 404 costs were stabilizing. Less clear was whether auditors had responded to guidance urging more judicious audits.

See below for CFO.com's live coverage of the May 10, 2006 roundtable, and for the articles that chronicled the days leading up to the event. And for additional analysis and off-beat commentary, check out the links to the CFO.com blog.


FEATURE ARTICLE
The Second Time Around
Reported declines in compliance costs are likely to temper conflicts between companies and their auditors at this year's roundtable on Sarbox 404.


COVERAGE OF THE MAY 10, 2006 ROUNDTABLE ON 404
Union Lawyer, Midcap CFO Clash on 404
Workers want strong assurances that all companies have strong controls, while small companies call for a compliance break.
Revise 404 for the Market, Panelists Say
Panelists applaud the benefits of SOX 404 but suggest disclosure and requirement changes.
Panelist: SEC Deserves Failing Grade
A diverse final panel results in some testy exchanges as the regulators seek next steps for 404.
Panel: Don't Audit Low-level Risks
Roundtable participants debated the need for an external audit on controls that pose little risk to financial statements.
SEC Contemplates Auditorless World
Former Computer Sciences Corp. CFO says that corporate-compliance efforts would be more effective if they didn't proceed in lock-step with auditor agendas.
More 404 Guidance, Please
Panelists at the SEC's roundtable request more guidance aimed at helping management, not auditors, cope with Sarbox 404.
Section 404, Year Three: Ready for IT?
A body of knowledge about information technology and internal controls doesn't exist, say roundtable panelists; companies and auditors haven't developed the practical experience that usually accompanies audits and testing.
Cry of Pain from Small Companies
Sarbox 404 puts investment in biotech and other small-company sectors in danger, says one panelist.
Material Weakness at the Roundtable
Opening salvos at the SEC roundtable included talk of better definitions of material weaknesses.
The Official 404 Roundtable Agenda
The Joint SEC/PCAOB Roundtable Discussion on Second-Year Experiences with Internal Control Reporting and Auditing Provisions

RECOMMENDED READING ON SARBANES-OXLEY SECTION 404
404 Makes an IPO: Mission Impossible
A host of CFOs sound off about their Sarbox problems prior to the SEC's Wednesday roundtable.
GAO Eyes 'Targeted, Limited' 404 Relief
Also expresses concern with a lack of clarity in recent recommendations by the SEC's Advisory Committee on Smaller Public Companies.
SEC Chief Accountant Defends 404
Admits SEC's cost estimates were "way off," but says companies are likely testing too many controls. He also says the concept of different rules for smaller companies is "difficult."
Panels on 404 Skirt Small-Company Woes
Sponsored by the SEC and the PCAOB, the May 10 roundtable will only focus on second-year compliance experiences.
Q&A: Harvey Pitt on 404
Former SEC Chair Harvey Pitt comments on how to make SOX 404 work for smaller companies without exempting them.
Cox: "My Goal Is to Make 404 Work"
Sarbanes-Oxley can be made to work for smaller companies, and U.S. capital markets need not fear competition from less-regulated countries, SEC Chairman Christopher Cox told Congress Tuesday.
Conspiracy Against 404 Exemptions?
A member of the SEC's small business committee charges that a former SEC official is orchestrating public opposition to 404 exemptions.
Auditors, Clients Square Off over 404 Exemption
Public companies, accounting firms fired their parting shots to the SEC's small-business committee; professional investors were conspicuously silent.
Is SOX Driving Small Companies Overseas?
The SEC's committee on smaller businesses kept one eye on IPO activity abroad as it finalized its suggestions for tweaking Section 404.
Why Leave 404 to Your Auditors?
At an SEC committee meeting on small businesses, one member suggests companies ought to be able to put the attestation of their internal controls out to bid.
A Final Cry for Relief
One CFO says section 404 of Sarbanes-Oxley put a stressed out employee in the hospital. A teleconference Wednesday marks the last chance for small companies to air such complaints.
Small-Company Execs Sound Off on 404
Next month's SEC roundtable on Sarbox's internal control provisions could be dominated by gripes from small caps.
Small-business 404 Waiver Unlikely: Cox
''Our emphasis is on making 404 work and implementing it in a cost-effective and investor-protected way,'' says the SEC chairman.
A Small Uproar over 404
Two CFOs sound off about the disconnect between the costs and benefits of complying with the internal-controls provision.
A Tough Act to Follow
What CFOs really think about Sarbox — and how they would fix the *!#& thing. Including the results of our exclusive survey.
CFOs Seek Sarbox Triage
Many would prefer a risk-based strategy of Sarbanes-Oxley compliance that would dispense with the ''checklist'' approach and enable them to channel corporate energies toward the most serious problems.
404 Costs to Drop, Big Four Maintain
After ''start-up and one-time factors'' are accounted for, say the firms, the total cost of complying with the thorny Sarbox provision should fall about 40 percent for companies both large and small.
Feeling the Pain
Are the benefits of Sarbanes-Oxley worth the cost?

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SCORING THE 404 DEBATE

For a more free-wheeling take on the SEC/PCAOB 404 Roundtable, check out the blog posts below from Ron's Rant, or click to go to the main blog page.

Don't Do This At Home, Kids

More Conflict at the 404um

Even Bigger Benefits?

Sherwin's Conflict

Who Needs Guidance?

Better in The Bahamas?

From the Mouths of the Regulated

What's Five Points Between Enemies?

Gradison Throws Down Gauntlet

Roundtable Opens with Focus on AS2

Roundtable May Include Small Biz Afterall

Let the Roundtable Games Begin

How the GAO Spells Sarbox Relief