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DISCUSSIONS > THE SARBANES-OXLEY ACT [ REFRESH ]
Thread Title: Should new CEO be disclosed as a significant change to ICFR
Created On Thursday January 31, 2013 5:48 PM
  Should new CEO be disclosed as a significant change to ICFR
  Should new CEO be disclosed as a significant change to ICFR


PGM


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Thursday January 31, 2013 5:48 PM

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Does a new CEO constitute a 10-Q disclosure requirement as a "significant change in internal control over financial reporting"?

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Peter Moino
GMCR, Inc
Director of Internal Audit

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Paul_M


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Tuesday February 05, 2013 3:36 PM

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The requirement “to disclose any significant changes in its internal controls” was proposed by the SEC in their original draft rules in 2003. Under the final rules, “a company must disclose any change in its internal control over financial reporting that occurred during the fiscal quarter covered by the quarterly report, or the last fiscal quarter in the case of an annual report, that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting.” [emphasis added]

So the question is simply, how does a change in CEO materially affect your company’s internal control over financial reporting? The CEO certainly has an important role, especially in establishing tone at the top, but I would have a difficult time understanding how the CEO could be an integral part of the typical internal control structure.

Also, while the SEC guidance encouraged disclosure of changes even in the absence of a material weakness, I am not aware that anyone has actually done that. There may be an example or two in the early days of SOX, but I’ve never heard of it.

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DISCUSSIONS > THE SARBANES-OXLEY ACT [ REFRESH ]
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