On October 17 the PCAOB released for comment proposed guidance on auditing internal control over financial reporting in smaller, less complex public companies.  See http://pcaobus.org/News_and_Events/News/2007/10-17.aspx, and click on the discussion paper link.  The guidance does not define the terms "smaller" or "less complex."  Perhaps interesting from the audit committee perspective, at page 19 of 52, discussing actions that a smaller, less complex company might take to address the risk of management override, the paper in part lists four areas to consider:  (1) maintaining integrity and ethical values (tone at the top, and ethical compliance processes); (2) increased oversight by the audit committee; (3) whistleblower processes; and (4) monitoring controls over certain journal entries.  The auditor would evaluate the effectiveness of each of those four areas, including audit committee oversight.  The paper also does not define what "increased oversight by the audit committee" might be.  Effective audit committee oversight already is fairly broad without being involved in the day-to-day operations of the company.

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