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Challenging optimism about the efficiency of new auditing standards, the House Small Business Committee’s chairwoman called on federal regulators to give thousands of small public companies even more time to comply with a controversial section of the 2002 Sarbanes-Oxley law.

Rep. Nydia Velazquez, D-NY, said on Tuesday that the Securities and Exchange Commission and the Public Company Accounting Oversight Board must implement the internal-controls section of the law in a way that “does not hamper America’s competitiveness.” She said that “postponing the compliance deadlines for at least an additional year would allow us to make this determination.”

The 2002 law requires company management to evaluate internal controls over financial reporting, subject to review by outside auditors. The SEC has delayed applying the rules to more than 6,000 small companies at least four times, most recently citing a need to make the rules more efficient. Under current policy, small public companies will begin submitting management reports in 2008, and the auditor reports in 2009.

Nasdaq: House Lawmaker Calls On SEC To Delay Internal-Controls Rules

The Securities and Exchange Commission on Wednesday threw its weight behind finalising fresh guidelines aimed at clarifying how companies and auditors should comply with the Sarbanes-Oxley law.

The move signals that work by the US authorities to ease the burden of compliance with the 2002 law is moving into its final stage three months after proposed revisions were first floated.

At issue is how the SEC’s new guidelines for company management on implementing the law’s Section 404 internal controls provisions can be more closely aligned with separate guidance for auditors issued by the Public Company Accounting Oversight Board (PCAOB).

There is also disagreement over the extent to which external auditors should rely on a company’s own reviews of its controls.

This is testing US regulators’ willingness to adopt a more flexible, “principles-based” approach to corporate controls than those prescribed under Sarbox.

FT.com: SEC pushes clearer Sarbox guidelines