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[GOVERNMENT]
When the SEC finally blessed the Public Company Accounting Oversight Board's (PCAOB) Auditing Standard No. 5 (AS5), "An Audit of Internal Control over Financial Reporting that Is Integrated with an Audit of Financial Statements," on July 25, it split the difference on the last remaining issue: how to define the term "significant deficiency." The SEC had sent out a notice in late June, asking for comments on that, and business groups had asked the agency to modify the PCAOB's definition-which the SEC declined to do on July 25. The Sarbanes-Oxley Act requires a company to report a significant deficiency to its outside auditor and the audit committee, but not the shareholders, as is the case with a "material weakness." The SEC has made it clear that its management guidance on Section 404 would use whatever definition of "significant deficiency" becomes final in AS5.
The auditing industry and financial executives pushed-unsuccessfully, it seems-for the SEC to tweak the definition that the PCAOB had settled on last May in the version of AS5 approved at that time, which defined a "significant deficiency" as "a deficiency, or a combination of deficiencies, in internal...