The new ruling on Sarbanes-Oxley will allow company executives to use their own judgment to identify the areas of their business most at risk of triggering financial errors, determine whether controls are in place to address the risks, and evaluate the efficiency of those controls.

Overall, companies should be able to conduct fewer tests and gather less documentation to back up their evaluations of internal controls.

As for the new rules voted today by the PCAOB -- a private-sector corporation created by the Sarbanes-Oxley Act -– they equally eliminate unnecessary auditing procedures by encouraging accountants to rely on work companies have already done.

Mike Duffy, president and CEO of compliance automation software maker OpenPages, says the SEC ruling on Sarbanes-Oxley “provides the clarity that was missing. Companies will no longer have to focus on areas that aren’t critical to their business.”

SEC Chairman Christopher Cox yesterday said Congress had never intended that the 404 process of the Sarbanes-Oxley Act should become “inflexible, burdensome, and wasteful.”

“The objective of Section 404 is to provide meaningful disclosure to investors about the effectiveness of a company’s internal controls systems, without creating unnecessary compliance burdens or wasting shareholder resources,” Cox said.

Executives had been complaining that without specific instructions, they have carried out expensive, time- consuming work that was then duplicated by their auditors.

The SEC had also come under fire from business groups and lawmakers who blame the 2002 Sarbanes-Oxley Act for driving business to less regulated markets overseas.

Last year, companies spent an average of $2.92 million to comply with Sarbanes-Oxley, according to a survey of larger companies by Financial Executives International (FEI) .