The Securities and Exchange Commission last week gave smaller public companies another one-year exemption from complying with the Sarbanes-Oxley Act’s Section 404b that their internal controls be audited by accounting firms.
The commission has approved one-year exemptions for small companies every year since the law went into effect in 2002. Companies whose market value is less than $75 million won’t have to disclose such audit findings in their annual reports until fiscal years ending on or after Dec.15, 2009. Companies of all sizes this year are filing their first Section 404a reports. That portion of the bill requires company management to assess the effectiveness of the company’s internal controls over financial reporting
Some investor advocates immediately denounced the extension.
“The SEC should be cracking the whip, not enabling this reckless disregard for investor protection and market transparency,” Barbara Roper, the Consumer Federation of America’s director of investor protection told Financial Week. “Small public companies still do not have basic protections in place designed to ensure that their financial statements are accurate.”
In its statement, the SEC also said it had gotten approval from the Office of Management and Budget to collect data for its cost-benefit study of the implementation of Sarbanes-Oxley. Commission staff will start conducting interviews and doing a web-based survey of small companies’ costs and benefits, it said.