SEC and PCAOB Developments 2008 – Risk Alert

This Audit Risk Alert (alert) provides auditors and accountants practicing in business and industry with a detailed overview of recent developments at the Securities and Exchange Commission (SEC) and Public Company Accounting Oversight Board (PCAOB) with respect to financial reporting and auditing matters.

In this alert, you will find recent developments from the SEC, PCAOB, Committee for Sponsoring Organizations of the Treadway Commission, and the Center for Audit Quality.

This alert includes the latest information regarding internal control reporting requirements mandated under Section 404 of the Sarbanes Oxley Act of 2002, including PCAOB Auditing Standard No. 6 and the latest SEC rules on internal control over financial reporting for non-accelerated filers.

You will also find discussions related to the XBRL initiative, convergence with International Financial Reporting Standards, and a section dedicated to bringing you SEC and PCAOB small business initiatives.

Securities and Exchange Commission Developments

.01    The summaries that follow are for informational purposes only and should not be relied upon as a substitute for a complete reading of the applicable rule or development. In addition, the information presented in the following does not encompass all of the recent issuances and activities of the U.S. Securities and Exchange Commission (SEC). See the SEC Web site at www.sec.gov for complete information.

SEC Final Rules

Extension Granted Involving Internal Control Over Financial Reporting

.02    On June 26, 2008, the SEC released the final rule Internal Control Over Financial Reporting in Exchange Act Periodic Reports of Non-Accelerated Filers, which amends a temporary rule. The final rule extends the time period that a nonaccelerated filer would be required to provide the auditor's attestation report on internal control over financial reporting in an annual report filed for fiscal years ending on or after December 15, 2009. The temporary rule had originally set a requirement of December 15, 2008. This amendment therefore extends that requirement one year. The full text of this rule can be found at www.sec.gov/rules/final/2008/33-8934.pdf.

SEC Eases Acceptance of International Financial Reporting Standards Financial Statements

.03    On December 21, 2007, the SEC took a major step toward easing the acceptance of International Financial Reporting Standards (IFRS) financial statements by adopting rules to accept from foreign private issuers financial statements prepared in accordance with IFRS as issued by the International Accounting Standards Board (IASB) without reconciliation toU.S.GAAP. This rule marks an important step in the process toward the development of a single set of high quality, globally accepted accounting standards. This rule became effective March 4, 2008. Readers can access this rule at
www.sec.gov/rules/final/2007/33- 8879.pdf.

.04    More than 100 countries now either require or allow the use of IFRS for the preparation of financial statements by listed companies, and additional countries are moving to do the same. This recent movement to IFRS outside the United States has resulted in an increase of filings with the SEC of foreign private issuers that represent in the footnotes to their financial statements that their financial statements comply with IFRS as published by the IASB— from a relative few in 2005 to approximately 110 in 2006. The SEC expects this number will continue to increase in the future, particularly pursuant to Canada's announced move to IFRS, as there currently are approximately 500 foreign private issuers from Canada.

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