The US Senate's thumping defeat of an amendment to exempt
certain small and medium-sized businesses (SMBs) from compliance
with Section 404 of the Sarbanes-Oxley Act is bad for business US
poiticians have declared.
SMBs fell foul of political battles by those decrying
the amendment as an attack on shareholder protections and
others countering
that
SOX is crippling American businesses and preventing them from
competing in a global economy.
 | | | | | The SEC and PCAOB are working to
more tightly define the scope of SOX. That is where companies will
find the relief.
Michael Rasmussen
analystForrester Research
Inc. |
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The amendment, would have made compliance with Section 404 optional
for companies with total market value of less than $700
million.
The political posturing doesn't mean much for small and
medium-sized businesses (SMBs), analyst Michael Rasmussen said. For
less heat and more light on the requirements of the law, publicly
traded SMBs will have to wait another month or so for the U.S.
Securities and Exchange Commission and its partner in compliance,
the Public
Company Accounting Oversight Board (PCAOB), to approve their
long-promised revised guidelines and new accounting rules.
"I think it's par for the course now that SOX is here to stay,"
said Rasmussen, who covers compliance at Forrester Research Inc. in
Cambridge, Mass. "The SEC and PCAOB are working to more tightly
define the scope of SOX. That is where companies will find the
relief."
DeMint, who tried to attach his amendment to another bill
focused mainly on improving science and math education, argued that
approval of his measure by the Senate would "shake up the SEC" and
spur revisions.
Congress passed the Sarbanes-Oxley Act of 2002 in the wake of
the financial wrongdoing at Enron Corp. and other corporate crimes,
as a way to protect investors and fix the accounting practices that
allowed for such abuses. The act was criticized almost immediately
after it was signed into law in 2003 -- as costing far more to
comply with than originally estimated, as too complex and for
posing a tremendous burden on smaller companies in particular.
Section 404, considered the most onerous requirement, says that
publicly traded companies must show their internal financial
controls are accurate and must have an auditor sign off on
management's assessment. The meager guidance on 404 from the SEC
made matters worse, prompting many companies to err on the
expensive side of caution. The political slings and arrows -- and
filing extensions granted by the SEC -- have been coming ever
since.
No date set, but reassurance from Cox
PCAOB spokesperson Michael Shokouhi said the board, which
proposed
new auditing rules in December, aims to get
final board approval by early summer, but no date has been
set.
The latest from the SEC on the application of Section 404 to small
business came from
Chairman Christopher Cox, when he testified
before the Senate Committee on Small Business and Entrepreneurship.
He said the SEC already "has been very sensitive to the special
concerns" of the smallest public companies, by exempting businesses
with less than $75 million in public equity, or some 6,000 public
companies, from providing the audited internal control reports
required by Section 404.
But Cox also acknowledged "the way 404 was being implemented was
too expensive for everyone," and laid out the steps the SEC has
taken to "rationalize" 404 for small businesses, including the
extended deadlines for filing announced in
December. He stated: "The reforms we're making to the SOX 404
process are intended to be of direct benefit to America's small
businesses -- and the millions of Americans who work for them,
invest in them and benefit from all that they provide to our
economy."
Let us know what you think about the story; email:
Linda Tucci, Senior News
Writer