Last week, nine accounting firms—including eight of the largest in the country—issued a joint framework for use in implementing Section 404 of The Sarbanes-Oxley Act.

This paper, released Oct. 28, outlines a "suggested framework for evaluating manual and automated

process/transaction-level exceptions and deficiencies" resulting from the evaluation of a

company’s internal control over financial reporting.

Developers of the framework included each of the Big Four: PricewaterhouseCoopers, Deloitte & Touche, Ernst & Young, and KPMG. Four other firms involved were among the "Second Six" firms, including Grant Thornton, BDO Seidman, Crowe Chizek, and McGladrey & Pullen.

Messier

Georgia State University professor William F. Messier Jr. was also credited as a contributor to the framework. Messier serves on the AICPA's Auditing Standards Board, and is chairman of the institute's International Auditing Standards Subcommittee. The final firm listed as a developer of the framework was Harbinger,

which—as of Oct. 27—had not been approved to audit U.S. issuers by the Public Company Accounting Oversight Board. In fact, the firm was not on the PCAOB's list of 39 auditors with pending registration applications. According to Messier, Harbinger is a new firm formed by Mike Umscheid, who was a member of the PCAOB's recent Roundtable on Reporting on Internal Control.

According to the document, The framework is to be used in conjunction with the PCAOB's internal control auditing standard, which is titled "An Audit of Internal Control Over Financial Reporting Performed in Conjunction With an Audit of Financial Statements" (see box above, right).

The framework was developed to help auditors evaluate deficiencies in a consistent manner. "Because of the need to apply judgment and to consider and weigh quantitative and

qualitative factors," notes the document, "different individuals evaluating similar fact patterns may reach

different conclusions."

The framework outlines steps that auditors should consider when evaluating certain controls, and graphically illustrates a "decision tree" that auditors can use.

The complete 13-page framework is available from the box above, right.

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