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After receiving feedback from CFO's and other finance directors, the Securities and Exchange Commission has announced that it will hold an open meeting on April 4, 2007, to discuss the Public Company Accounting Oversight Board's (PCAOB) proposed auditing standard for Section 404 of the Sarbanes-Oxley Act and the coordination of that proposed standard with the Commission's related pending proposal to provide guidance for management of public companies implementing Section 404.

Both proposals were published for public comment in December 2006, and the comment periods for both proposals ended on Feb. 26, 2007.  It appears that both parties received feedback alluding to gaps and inconsistencies between the two standards. The open meeting is another step towards aligning the two regulators and "improving the reliability of financial statements public companies file with the Commission while making compliance with Section 404 more efficient and cost effective".

As part of this process, the Commission has proposed management guidance for Section 404 compliance designed to focus attention on those internal controls that present the greatest risk for a material financial misstatement. At the same time, as a companion to the proposed SEC guidance, the PCAOB has proposed a thoroughgoing revision of its existing standard for Section 404 audits.

The comment letters received by the SEC and the PCAOB have highlighted the importance of alignment between the Commission's and the PCAOB's proposals. At the meeting, the Commission's staff will describe the remaining issues in aligning the proposed approaches, and those issues will then be considered by the Commission.

"Effective and efficient Sarbanes-Oxley Section 404 implementation is vitally important for investors in public companies," said SEC Chairman Christopher Cox. "For this reason, the SEC and the PCAOB have been working together to improve Section 404 procedures to establish a risk-based, top-down approach that is scalable for companies of all sizes. This meeting will help to keep us on track to consider final adoption of our management guidance in May 2007."

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