FEI SVP Grace Hinchman Testifies to Congress on Section 404
April 8, 2006
On April 5, 2006, FEI's Senior Vice President-Public Affairs and Technical Activities, Grace Hinchman, testified before the Subcommittee on Regulatory Affairs of the House Committee on Government Reform's hearing entitled, "The Sarbanes-Oxley Act Four Years Later: What Have We Learned."
In her testimony, Hinchman noted, "Overall, FEI believes that the heightened emphasis on internal controls, corporate governance and the enhanced role of financial executives brought about by Sarbanes-Oxley have all been very positive." She continued, "Generally, the SEC and the PCAOB [Public Company Accounting Oversight Board] have done an impressive job in fulfilling a difficult task by striking a balance in efficiency and cost effectiveness while maintaining the integrity and intent" of Section 404.
"However," Hinchman noted, after citing statistics from FEI's March 2006 survey of the costs and benefits of Section 404, available here, "the rules and standards related to the implementation of Section 404 of the Act still require significant attention" or further guidance from the SEC and PCAOB, particularly to "right-size" PCAOB's Auditing Standard 2 to improve it for all size companies, and for the SEC to provide more guidance to management.
Hinchman concluded, "FEI supports the efforts of the SEC and the PCAOB in implementing the requirements of the Sarbanes-Oxley Act of 2002. However, it is evident that more work needs to be done in implementing Section 404 of the Act. We are confident that the SEC and PCAOB are up to the task and they possess the authority to do so. Through continuous study, review and feedback from large company and small company preparers, auditors, regulators and investors by the SEC and the PCAOB, FEI is confident that a reasoned approach to Section 404 implementation that is "right-sized" for all public companies will be achieved."
Others testifying at the April 5 hearing on Section 404 were Damon Silvers, Associate General Counsel of the AFL-CIO (who is also a member of the PCAOB's Standing Advisory Group or SAG), Alex J. Pollock, Resident Fellow at the American Enterprise Institute (who formerly served as President of the Federal Home Loan Bank of Chicago), and a number of small company CEOs and CFOs.
Additionally, there was a panel of three Congressmen who have been engaged in a bi-partisan "listening tour" of views on the Sarbanes-Oxley Act and Section 404 in particular.
Congresswoman Candice Miller, Chair of the Subcommittee on Regulatory Affairs, indicated that the point of the oversight hearing was to discuss these issues, as they have increasingly been brought to the attention of members of Congress.
Testimony of Grace Hinchman, SVP, FEI
All testimony and opening statements
FEI's most recent (March, 2006) survey of 404 costs and benefits
Prepared April 8, 2006 by Edith Orenstein (eorenstein@FinancialExecutives.org), Director, Technical Policy Analysis, Financial Executives International (FEI), based on listening to public webcast of the Congressional hearing and related written testimony filed. This summary does not represent FEI opinion, unless specifically noted above.