response in the US
A proposed one-year delay for small
businesses to comply with Section 404(b) of the Sarbanes-Oxley Act
(SOX) has been cautiously accepted by an accounting institute but
challenged by Grant Thornton US.
Securities and Exchange Commission (SEC) chairman Christopher
Cox proposed the delay for filers with less than $75 million in
market capitalisation due to the impact and cost of regulation on
smaller companies. Around 5,000 small public companies are still
not required to provide an auditor’s report on internal
controls.
Cox proposed the extension to allow the SEC to conduct a
cost/benefit study of Section 404 (b) compliance under the new
auditing standard and management guidance created by the Public
Company Accounting Oversight Board and the SEC. He doesn’t expect
the study to finish before June 2008.
Institute of Management Accountants president and chief executive
Paul Sharman welcomed the extension but believes planned
implementation would distract small business executives from
running their companies. Sharman queried the SEC’s proposed
cost/benefit study, which he views as irrelevant to many small
businesses that have no experience in quantifying compliance costs
and benefits in the first year of implementation. He called for a
survey of ten to 20 companies using proper process analysis
techniques. “We need to be prescriptive but be prescriptive in a
way that’s premised on a decent piece of work by the SEC staff that
actually gets inside with those corporations that they are meant to
oversee and provide them with some useful, practical guidance,” he
said.
Grant Thornton US said the SEC delay would move the effective date
nearly five years beyond the original implementation date. The firm
said it is against such a move because few small public companies
had taken advantage of previous deferrals to properly prepare for
implementation, which has “impaired” the SEC’s ability to gather
accurate data for the study.
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