FOR IMMEDIATE RELEASE
ICBA Recommends Changes to Implementation of Sarbox Section 404
Washington, D.C. (April 4, 2005) - The Independent Community Bankers of America (ICBA), the nation's largest banking trade organization, made a number of recommendations to the Securities and Exchange Commission (SEC) concerning the implementation of the internal control attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or "Sarbox."
"It is clear from our recent community bank survey that complying with Section 404 of Sarbox is a major financial burden for many publicly held community banks," said Camden R. Fine, ICBA president and CEO. "Section 404 is straining the resources of publicly held community banks, impairing their competitiveness, and draining resources away from serving customers and communities. We urge the SEC to follow the example of the banking agencies regarding internal control attestation requirements and adopt an exemption from the requirements of Section 404 for community banks. We believe that banks with less than $1 billion in assets should be exempt."
The SEC is holding a roundtable discussion on April 13, 2005, to discuss the experiences that accounting firms and public companies have had implementing Section 404 of Sarbox and the new Auditing Standard No. 2., An Audit of Internal Control Over Financial Reporting in Conjunction with an Audit of Financial Statements released by the Public Company Accounting Oversight Board (PCAOB) in March 2004. In addition to exempting community banks with assets of less than $1 billion, ICBA recommended that:
- the application of Auditing Standard No. 2 be tiered to the size and complexity of the institution so that community banks are not subject to the type of internal control testing and auditing that may be appropriate for a large bank but unnecessary to achieve the desired ends for a community bank;
- outside auditors be able to rely more on bank examinations as well as the work of internal auditors and other internal staff; and
- more guidance be issued by the PCAOB on the issue of "materiality" to eliminate the excessive testing that is occurring during internal control audits.