Sox 404 Work for Small Public Companies May Decrease

Source: Accounting Web.com

The Securities and Exchange Commission is considering either reducing or exempting small public companies (under $125 million in market capitalization) from the requirements of Sarbanes Oxley section 404. Because small companies have a disproportionately high cost of compliance, many of them had already begun to perform the 404 compliance work without outside help

Some CPA firms are already beginning to reposition themselves. Some are assisting with internal audits, and some are repositioning to fraud prevention engagements, or help with information technology controls. Non Big 4 CPA firms may begin marketing audits of lower cap public companies.

Some people think the 404 exemption is a precursor to separate rules for different sized companies. CPA firms may begin developing niches targeted at different sized companies, i.e., focusing on certain size ranges as they now focus on certain industries or functional niches.

Section 302, which requires CEOs and CFOs to attest that their controls on financial reporting are adequate, is apparently not being considered for exemption.

Half of public companies have market capitalizations of less than $100 million.

From Accounting Web.com. The complete article can be found at http://www.accountingweb.com/cgi-bin/item.cgi?id=101630&;d=815&h=817&f=816&dateformat=%B%20%e,%20%Y. See “Bracing for Sox 404 Small Business Exemption.” This article is viewable by Accounting Web subscribers only. Subscription information is available at the site.