If companies comply with a new rule on internal controls, it will make it hard for them to speed up their year-end reporting as the SEC had mandated, the Wall Street Journal reported.
As a result the SEC is considering a one-year extension for public companies complying with the new rule that makes annual reports due 60 days after their year-end rather than 75 days as it was in the past.
Public companies and large accounting firms are in agreement that more time is needed if they are also going to comply with the new Sarbanes-Oxley based rule that requires improved internal controls over financial reporting.
SEC staffers realize that companies will find it difficult to comply with both rules and as a result, will soon recommend the one-year extension before companies have to meet the 60-day reporting standard, the Journal reported.
The new internal controls rule is intended to prevent the very accounting problems that caused the corporate meltdowns at WorldCom and Enron. Beginning this November, companies must have tight internal controls in place, must assess their effectiveness and then pay for an independent assessment by outside auditors, the Journal reported. The internal controls assessment by the outside auditor has to be included in the company’s annual report—a difficult feat with just 60 days to get it done.
Jim Quigley, chief executive officer of Deloitte & Touche USA LLP, told the Journal that it would be a struggle for companies to comply with both an accelerated filing schedule and the new internal-controls rules in the same year. "This is a very significant change that registrants are required to deal with," Quigley said.