After several delays, in 2010 small public companies must finally begin providing the Securities and Exchange Commission with certified assessments of their internal controls.
Beginning June 15, 2010, small public companies with a public float of less than $75 million (called accelerated filers) must comply with Section 404(b) of the Sarbanes-Oxley Act. Section 404(b) requires organizations to have management and independent auditors sign off on the effectiveness of their internal controls.
While the Sarbanes-Oxley Act was passed in 2002, it had not applied to non-accelerated filers for fear that the costs of compliance would be too high. The SEC delayed applying Section 404(b) to small public companies until an Office of Economic Analysis study on the compliance costs could be published. The study was completed in September 2009 and the June 15th compliance date was announced on Oct. 2.
The purpose of the study was to determine whether guidance issued by the SEC in 2007 helped reduce compliance costs. According to the data, compliance costs increase with company size, decrease with compliance history, and have decreased overall since the 2007 guidance.
However, while the study found that larger companies had higher compliance costs than small companies, small companies had higher costs as a percent of asset value. The conclusion being that compliance has certain fixed costs that impact organizations regardless of size. In addition, the study found that organizations do believe there are direct benefits to Sarbanes-Oxley compliance.
Now that the study has been published, the SEC does not expect Section 404(b) reporting for non-accelerated filers to be delayed again. SEC Chief Mary Schapiro said in a statement “Since there will be no further Commission extensions, it is important for all public companies and their auditors to act with deliberate speed to move toward full Section 404 compliance.”
In response to the impending deadline, Rep Scott Garrett from New Jersey introduced legislation in Congress designed to permanently exempt all non-accelerated filers from Section 404(b) compliance. As of mid October, the bill was still in committee.
Comments
Since there is unstable
Since there is unstable economy, no doubt that small businesses are having a hard time penetrating the market. Now, there's a lot of talk about economic recovery, and the White House has been talking about the attack on the middle class. Well – it turns out there has been a steady wage decrease for the average worker since the 1970s. Dollar amounts have increased, yes, BUT combined with inflation, and the costs of goods and services which increased above the rate of inflation, it turns out a lot of economic problems are wage problems. If this continues, more and more entity will surely drop the box.