US Center for Audit Quality (CAQ) chief executive Cindy Fornelli hopes the deadline for small US listed companies to comply with Sarbanes-Oxley Act section 404(b) will be reached before the Senate debates a bill that could allow permanent exemption.
Section 404(b) requires listed companies to report on the effectiveness of their internal controls.
The Securities and Exchange Commission delayed the implementation of 404(b) for the smallest US public listed companies – non-accelerated filers – to allow them added time to prepare. But the final deadline for implementation is 15 June this year.
The CAQ believes 404(b) is an important safeguard for investors.
But the House of Representatives passed a bill in December that would permanently exempt non-accelerated filers from the requirements of 404(b).
There are several steps that must be taken before the bill becomes law.
First, the Senate must pass a similar version of the bill.
Then, the House of Representatives and the Senate must draft a united bill that marries the two. This bill will then go to a vote.
To further complicate matters, a vote on the 404(b) exemption will not happen alone, but will be debated alongside other provisions.
“Even if both agree 100 percent on this particular provision, it could get shot down because it is a bill that has got other stuff in it and the whole bill dies,” Fornelli explains.
Fornelli does not think the Senate bill will appear until April.
“So what happens to the Senate version if the Senate doesn’t get around to voting on it until after June 15 and all of the small companies have complied with 404(b)? I don’t know if that helps or hurts the cause. It is kind of an interesting wrinkle,” Fornelli says.
“My hope is that quietly [non-accelerated filers] will all have to comply with it in June and then in August we can argue that they are doing it already so why are we arguing about this?”