SEC to ease auditing guidelines

The Securities and Exchange Commission approved a framework Wednesday that would make it easier for companies and their auditors to comply with a landmark anti-fraud law.

The vote by the five SEC commissioners was unanimous to support building more leeway into regulations, especially rules for auditors being written by the independent board that oversees the accounting industry.

The commissioners debated the changes, proposed by the SEC staff, at a public meeting that showcased differences over a crucial part of the Sarbanes-Oxley law. Sarbanes-Oxley, which arose from corporate scandals such as that leading to the collapse of Enron Corp., mandates that public companies assess the strength of their internal checks and balances to guard against fraud.

The proposed changes are intended “to eliminate waste and duplication” for companies that must comply with Sarbanes-Oxley, particularly smaller companies that the law will begin to cover this year, according to the SEC.

“These needed improvements in the Sarbanes-Oxley process are especially urgent for smaller companies,” SEC Chairman Christopher Cox said.

Commissioner Paul Atkins, a conservative Republican, said the current law contained numerous duplications in the process and “an incredible amount of needless work.” Democrat Roel Campos raised concerns about auditors potentially focusing only on the financial controls that present the biggest potential financial risk.

Business interests, especially technology companies and smaller businesses, have lobbied vigorously in recent years for a softening of the rules under Section 404 of the 2002 law, complaining that they are overly burdensome and costly.

The proposed changes endorsed by the SEC would allow tailoring of company audits to take into account the “particular circumstances” of a business, encourage auditors to use their own judgment in the process and allow flexibility for auditors in determining when they can rely on work previously done by others.