As expected, the U.S. Securities and Exchange Commission (SEC) voted unanimously July 25 to approve the proposed Public Company Accounting Oversight Board (PCAOB) Auditing Standard 5 (AS5). This action finally gives companies the power that they have wanted since the Sarbanes-Oxley Act (SOX) was passed in 2002: the unassailable right to take a top-down, principles-based approach to SOX, rather than the costly and time-consuming documentation free-for-all that characterized the first five years.

AS5, which replaces the PCAOB's previous Auditing Standard 2, was created in concert with new SEC guidance to give the regulators' official blessings to a risk-assessment methodology. The new streamlined standard, approved days before the fifth anniversary of SOX, will be effective for fiscal years ending after Nov. 15, 2007.

“We are pleased with the SEC's approval of AS5,” said Mark W. Olson, PCAOB chairman, in a statement. “However, this does not mark the finish line for the PCAOB.”