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08/2006 |
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COSO Guidance for Smaller Companies
Frank C. Bonaventure
Penny Somer-Greif
To Our Clients and Friends: As you may have heard, the Committee of Sponsoring Organizations of the Treadway Commission (COSO) recently released new guidance for smaller public companies to assist with their implementation of internal control over financial reporting. This guidance does not replace or modify COSO's 1992 Internal Control - Integrated Framework, which is used by most public companies to evaluate their internal control over financial reporting, but rather provides guidance on how to apply it. The newly released guidance is directed at smaller public companies and focuses primarily on helping management to establish and maintain effective internal control over financial reporting. COSO acknowledges, however, that the guidance "also may be useful to management in efficiently assessing internal control effectiveness, in the context of assessment guidance provided by regulators." We wanted to take this opportunity to remind non-accelerated filers, including small business issuers, that the Securities and Exchange Commission's (SEC) rules relating to management's report on internal control over financial reporting, and the related auditor's attestation report, pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, will be applicable to calendar-year end companies for their 2007 fiscal year. This means the required management report and auditor's attestation must be included in 2007 annual reports on Form 10-KSB that will be filed in March 2008, although the review, modification and documentation of internal control over financial reporting must begin well before that date. Although the SEC has indicated that it intends to release additional guidance directed at public-company management regarding the management evaluation and assessment of internal control over financial reporting, it has made clear that it does not intend to implement any further postponements of the applicability of the rules to smaller public companies or grant smaller public companies an exemption from the rules regarding internal control over financial reporting. The COSO guidance is divided into three volumes:
The new COSO guidance may be ordered through COSO's website at www.coso.org/publications.htm. The cost is $65 for members of COSO's sponsoring groups, including the American Institute of Certified Public Accountants and the American Accounting Association, and $90 for non-members. At COSO's website you may also download the Executive Summary for free and view the Frequently Asked Questions about the guidance that COSO released simultaneously with the new guidance. If you have any questions about the information in this Alert, please contact Frank C. Bonaventure at 410-347-7305 or Penny Somer-Greif at 410-347-7341. |
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Ober, Kaler, Grimes & Shriver
Maryland Washington, D.C. Virginia |
