Companies Advised to Use Established Internal Controls Guidance
Speaking last month on concerns regarding the reporting requirements for internal controls, Securities and Exchange Commission (“SEC”) Deputy Chief Accountant Brian Croteau recommended companies and auditors to use the agency’s existing two-part evaluation process. Per his speech at the American Institute of Certified Public Accountants’ Conference on Current SEC and Public Company Accounting Oversight Board Development, Croteau said companies should evaluate whether a material misstatement about their financial reporting controls is possible by using the interpretive guidance in Release No. 33-8810, Commission Guidance Regarding Management’s Report on Internal Control Over Financial Reporting Under Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and Staff Accounting Bulletin (SAB) No. 99, Materiality, (SAB Topic 1.M). Croteau noted that the “could factor” analysis of the evaluation can help companies when disclosing the severity of their control deficiencies in regulatory filings.