Snowe, Kerry Urge Sarbanes-Oxley Extension for Small Firms
March 5, 2007
Washington-Today Senators Olympia J. Snowe (R-Maine) and John Kerry (D-Mass.) called for a delayed implementation of the Sarbanes-Oxley Section 404 requirements for small public firms to ease the burden on complying with the expected new auditing standards. Section 404 requires firms to establish internal control frameworks and to file internal control reports. The Securities and Exchange Commission (SEC) and the Public Company Accounting Oversight Board (PCAOB) proposed rules and guidance late last year addressing this section and are accepting public comments through Monday, February 26th.
“Requiring small public companies to institute strong internal controls to ensure the accuracy of their financial reporting is appropriate,” Snowe said. “At the same time it is also prudent to allow small companies a year to work with the SEC and PCAOB guidelines before they are evaluated on the effectiveness of these controls. The delay in issuing final guidance to small public companies has created substantial hardships. Senator Kerry and I believe we should allow the necessary time for small companies to understand the rules by which they will be evaluated.”
“We can have strong corporate accountability standards while also reducing the burden for small firms who spend more time and money earned than big companies to comply with Sarbanes-Oxley,” said Kerry. “We must do everything possible to appropriately reduce red tape in order for small firms to grow and become dynamic public companies.”
A recent Government Accountability Office (GAO) report requested by Senators Snowe and Mike Enzi (R-Wyo.) found that small public companies spend considerably more on implementing Sarbanes-Oxley, particularly Section 404. The report found that firms with less than $75 million in market capitalization were spending 877 percent more than larger counterparts -- $1.14 in audit fees per $100 of revenue, compared to just $.13 per $100 for firms with greater than $1 billion in market capitalization.
Kerry and Snowe, the Chairman and Ranking Member of the Committee on Small Business and Entrepreneurship also urged the panels to carefully consider all comments from small public companies, especially those worth less than $75 million.
“Independent Community Bankers of America applauds the Senate Small Business and Entrepreneurship Committee for requesting up to a one year delay in the Section 404 due dates for non-accelerated filers so the calendar year filers will have at least until the due date for their 2008 annual report to file their management internal control reports and the due date for their 2009 annual report to file the auditor’s attestation report,” said Chris Cole, regulatory counsel for ICBA.
"The American Bankers Association fully supports the delay of the effective date of Section 404 for small companies. It is important to be sure that the changes being made to the Section 404 process are effective prior to asking small businesses to implement them, and we appreciate the leadership that Chairman Kerry and Ranking Member Snowe are taking with this effort,” said Floyd Stoner, executive director of congressional relations for the ABA.
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