New ICFR ConcernsBy
The Securities & Exchange Commission (SEC) and the Public Company Accounting Oversight Board (PCAOB) continue to focus on management implementation and outside auditing of internal controls.
In a recent speech, James V. Schnurr, chief accountant at the SEC, linked the arrival of the new converged revenue recognition standard from the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) with the need for companies to rethink their internal control over financial reporting (ICFR). “I believe the implementation of the new revenue standard provides an opportunity to be proactive and improve the design and operation of management review controls that may exist within a company’s revenue recognition process, including with reference to the various estimates and judgments that the new revenue standard may require,” Schnurr said.
ICFR continues to be a point of focus at the SEC. Schnurr explained, “Our involvement in a number of registrant matters related to ICFR would also suggest that some of these audit deficiencies may be, at least in part, indicative of deficiencies in management’s design or operation of controls, including management review controls.”