April 2000


The Financial Executives Institute (FEI) recently suggested new rules that require periodic management reports on the internal accounting controls at public companies.

The plan, outlined in a letter from FEI Vice President for Technical Activities Susan Koski-Grafer to SEC Chief Accountant Lynn Turner, supports requiring public companies to include statements about internal reports in annual management reports to shareholders.

The plan proposes that the requirements outline the elements to be present in the report without prescribing the exact language and format.

FEI said that the management reports do not need to be audited and separately reported on by external auditors. An adequate general requirement for the auditor to read any unaudited information supplied with but not part of the financial statements, to ensure that the information is not inconsistent with the audited financial statements, is already in place.

FEI's proposed elements for a "report of management" include the following:

* Management affirmation of its responsibility for the financial statements and all data presented;
* Management affirmation of its responsibility for a system of internal controls, a concise, general summary of how it addresses this responsibility, and its view as to whether the system in place provides reasonable assurance that access to assets occurs in accordance with management's authorizations and that transactions are appropriately recorded in the books and records; and
* Management's report should be signed by the chief executive officer, chief financial officer, chief accounting officer, or all three.

However, according to the letter, FEI believes that management should not be required to attest that "controls are effective as of a certain point in time or during a certain period" or make any other definite statement that does include the concept of reasonable assurance. *

Home | Contact | Subscribe | Advertise | Archives | NYSSCPA | About The CPA Journal

The CPA Journal is broadly recognized as an outstanding, technical-refereed publication aimed at public practitioners, management, educators, and other accounting professionals. It is edited by CPAs for CPAs. Our goal is to provide CPAs and other accounting professionals with the information and news to enable them to be successful accountants, managers, and executives in today's practice environments.

©2006 CPA Journal. Legal Notices

Visit the new cpajournal.com.