November 18, 2004

Phase-In; Phase-Out

Yesterday, the SEC adopted its proposed release to postpone the final phase-in period for acceleration of periodic report deadlines that apply to “accelerated filers.” Under the amended rules, the deadline for accelerated filers will remain at 75 days after year end for annual reports and at 40 days after quarter end for quarterly reports. The accelerated filing phase-in will resume for reports filed for fiscal years ending on or after Dec. 15, 2005, when an accelerated filer will have to file its annual report within 60 days after year end and file its quarterly reports within 35 days after quarter end.

The SEC said that the primary purpose of the postponement is to allow additional time and opportunity for accelerated filers and their auditors to focus their efforts on complying with new requirements regarding internal control over financial reporting that were mandated by Section 404 of SOX.

The PCAOB is Making Its List

At its meeting with its Standing Advisory Group yesterday, the PCAOB revealed an ambitious agenda for developing auditing standards in 2005.

The topics include:

• Auditor independence and tax services.
• Detection of and reporting on financial fraud.
• The relative authority of auditing guidance in the Board’s interim auditing standards.
• Communications with audit committees.
• Engagement quality review, also known as concurring or second partner review.
• Auditing related-party transactions.
• Consistency of application of generally accepted accounting principles.
• Use of confirmations in an audit.
• Auditing fair value measurements and disclosures.
• Elements of quality control for registered firms.
• Assessing audit risk.

The Staff of the PCAOB acknowledged that it may not be possible to address all of the above issues in 2005, so it may need to focus on the topics with the highest priority.

-Posted by Julie Hoffman