Yesterday, the SEC released its guidance regarding management’s report on internal control over financial reporting, and made clear that an evaluation in compliance with the guidance is one way to satisfy the Exchange Act Rules 13a-15 and 15d-15 evaluation requirements. As we reported on May 24, 2007, the guidance is meant to provide a principles-based framework to help public companies strengthen internal control over financial reporting without needless costs, which will particularly benefit small companies.
If you are interested in reviewing the actual text of the rule amendments, the SEC has also posted its adopting release. In addition to providing that a company which complies with the interpretive guidance in evaluating its internal control over financial reporting satisfies the Exchange Act Rules 13a-15 and 15d-15 evaluation requirements, the amendments provide for the following:
- a definition for the term “material weakness”;
- the elimination of the requirement that auditors attest to management’s evaluation process; and
- the requirement for an auditor’s single opinion on the effectiveness of internal control over financial reporting in its attestation report.
With one exception, the effective date of the rule amendments is August 27, 2007.
