SOX Center

As the SEC and PCAOB continue to revise their internal-control standards, what should small businesses do in the meantime? A few are asking senators for an extension.

More than 6,000 public companies face a serious dilemma about their Sarbanes-Oxley compliance: Should they use the current version of Section 404 now in reviewing internal controls over their financial reporting? Or should they wait until the Securities and Exchange Commission and Public Company Accounting Oversight Board issue final revisions later this year?

Decision time is approaching fast. Small businesses — or so-called non-accelerated filers — have until they file their 10-Ks for fiscal years that end on or after Dec. 15, 2007, to meet 404’s management assessment requirement. It’s a deadline that the SEC has extended several times, including that of the auditors’ attestation reports (non-accelerated filers don’t have to complete those documents until their 10-Ks are filed for fiscal years ending after December 15, 2008). And small-business advocates are hoping the SEC will extend those dates once again.

CFO.com: Could Small Biz Get Another Sarbox Reprieve?

A bipartisan bill in Congress that would ease Sarbanes-Oxley reporting demands on small businesses is a welcome move, according to William H. Venema, a corporate attorney at Epstein Becker Green Wickliff & Hall, P.C.

The odds of the bill passing are good, since this is the bill’s third incarnation in Congress in three years.

“The cost of complying with Sarbanes-Oxley has caused many companies to abandon plans to go public or to list on overseas exchanges, both of which are dangerous trends,” said Venema. “When Congress feels the political heat of an issue, it often responds in a way that can best be described as an overreaction. When the heat cools down, it is often a good idea to take a second look at the laws that were passed. The new bill is a realization that SOX went too far and stifled small business under reporting requirements.”

Morningstar: Bipartisan COMPETE Act is an Overdue Reform of Sarbanes-Oxley, Says Epstein Becker Green Wickliff & Hall Attorney

Parts of the landmark 2002 Sarbanes-Oxley corporate governance law should be implemented in different ways to save businesses money and time, U.S. Treasury Secretary Henry Paulson said in a speech Monday.

In prepared remarks to the Economic Club of New York, Paulson said a new law to amend the controversial act is not needed, but he acknowledged the impact its accounting provisions, in particular, are having on businesses large and small.

“We need to implement the law in ways that better balance the benefits of the legislation with the very significant costs that it imposes, especially on small businesses,” Paulson said.

Paulson singled out section 404 of the act, which has long drawn complaints from businesses for being costly and time-consuming. It requires management to sign off on the effectiveness of a company’s internal financial controls and requires an auditor’s attestation.

“Section 404 should be implemented in a more efficient and cost effective manner,” Paulson said.

The Securities and Exchange Commission will seek comments about a new auditing standard soon, Paulson said.

Morningstar: Paulson Calls For Some Sarbanes-Oxley Changes