What definition is the Commission currently using for internal controls and internal controls and procedures for financial reporting?
In the release adopting the rules pursuant to Section 302 of the Act, the Commission noted the pre-existing concept of “internal controls” contained in Codification of Statements on Auditing Standards Section 319 (“AU Section 319”). See Release 33-8124 fn. 59 and accompanying text. In Release No. 33-8138, the Commission proposed defining “internal controls and procedures for financial reporting” by reference to AU Section 319, subject to any future modifications by the Public Company Accounting Oversight Board. Pending completion of rulemaking, the staff interprets both “internal controls and procedures for financial reporting” and “internal controls” for purposes of Exchange Act Rules 13a-14(b)(5) and (6) and 15d-14(b)(5) and (6) and Item 307 of Regulations S-B and S-K by reference to existing literature regarding generally accepted auditing standards, which would also be by reference to AU Section 319.
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