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On Thursday, the Treasury department is announcing several important steps to ensure we preserve an efficient financial reporting system that provides reliable information, is supported by a sustainable auditing industry, and has enhanced compatibility with foreign reporting standards.
“In addition to changes in the auditing profession, Section 404 of Sarbox appropriately emphasised the importance of internal controls over financial reporting” Mr Paulson states. “However, implementation has proven more costly and burdensome than originally anticipated. A more risk-based implementation will be a positive step.”
Refering to the growing number of financial restatements over the past decade which poses significant costs on the capital markets, Mr Paulson announced that the Treasury intends to commission a rigorous analysis of factors driving financial restatements, and their impact on investors and the capital markets.
“The increasing globalisation of our markets also means that we must enhance the comparability of foreign company financial statements”, he said with a view towards the convergence of US GAAP and IFRS, and eliminating the US GAAP reconciliation requirements for IFRS-reporting foreign companies by 2009.
Mr Paulson underlined that “IFRS may be used on a stand-alone basis by foreign private issuers and possibly also by US issuers.'