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

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.

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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

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?”