Auditor Reporting on Internal Control Over Financial Reporting
(Release 33-9142)
The Dodd-Frank Act, which was signed into law on July 21, 2010, exempted non-accelerated filers from the requirement to have their auditors opine on the effectiveness of their ICFR. In September, the Commission adopted rule changes to conform its rules to the Act. The SEC had temporarily exempted non-accelerated filers from the requirement to have their auditors opine on ICFR, but that exemption had expired.
Observations:
Relief from the ICFR audit requirement is available to non-accelerated filers – not to filers whose public float is less than $75 million. Under Exchange Act Rule 12b-2, an accelerated filer retains its accelerated status until its worldwide public float decreases below $50 million as of the end of its second fiscal quarter. Consequently, an accelerated filer with public float between $50 million and $75 million as of the end of its second fiscal quarter continues to be required to file on an accelerated timetable and have its auditors opine on its ICFR.
Newly public issuers continue to be the only filers that are not required to provide management reports on the effectiveness of ICFR. Item 308 of Regulation S-K provides relief to these registrants in their first annual report, but they must provide management’s report on ICFR (and an auditors’ attestation report if they are accelerated filers) beginning with their second annual report. If newly public companies take advantage of this relief in their first annual report, they must state that management’s and the auditors’ reports were not provided due to the first-year exemption allowed by the rules.
The release is available on the SEC’s website at: http://www.sec.gov/rules/final/2010/33-9142.pdf.