SOX Center

Business has won the battle to ease one of the most controversial requirements mandated by the Sarbanes-Oxley corporate-reform law: that companies first review their own systems for ensuring accurate financial reports and then have them tested by outside auditors.

The nation’s business lobby, which says Sarbanes-Oxley is too burdensome, would like to see even broader changes in the law, which was passed in the wake of the Enron scandal to promote good corporate governance and prevent fraud. Democrats’ success in Tuesday’s congressional elections makes wholesale changes in the statute less likely.

But securities and accounting regulators are yielding to pressure for a more flexible reading of a provision of the law known as Section 404. Regulators have said they will propose guidance next month to help companies and auditors interpret Section 404 in a way likely to save them time and money.

That’s a big victory for business, which has mounted a concerted push to alter the regulation. It could also be good news for U.S. stock exchanges, which in recent years have blamed Sarbanes-Oxley, and particularly Section 404, for discouraging companies from going public in the U.S. or listing stock here.

Business Wins Easing of a Sarbanes-Oxley Rule