The U.S. Securities and Exchange Commission (SEC) recently issued a firm reminder to the nation's small businesses that the compliance date for Section 404 of the Sarbanes-Oxley Act of 2002 (SOX) is only nine months away. Come June 15, 2010, public companies with a public float below $75 million will have to comply with Section 404's auditing and reporting requirements.
Previously, only the nation's larger companies had been required to comply with the provision, as smaller companies had been granted an extension designed to give them more time to properly create, implement and document their internal controls. In a statement, however, SEC Chairman Mary Schapiro noted that there would be no further delays and that smaller firms will be required to report to the public on the effectiveness of their internal controls. "Since there will be no further Commission extensions, it is important for all public companies and their auditors to act with deliberate speed to move toward full Section 404 compliance," she said.
The original compliance date for small businesses was for fiscal years ending on or after December 15, 2009. The extension was granted to allow the SEC's Office of Economic Analysis to conduct a study to determine whether the agency's previously-issued guidance had successfully reduced the cost of compliance for smaller firms.
Since 1977, all U.S. public companies have been required to maintain internal accounting controls, but SOX requires the reporting of these controls and an auditor's attestation that they exist and are sufficient enough to prevent material misstatements on financial documents.
Schapiro was joined by SEC Commissioner Luis Aguilar in assuring investors, smaller companies and other non-accelerated filers that there will be no more delays. "Over the last seven years, in several separate instances, the Commission has deferred the compliance date for non-accelerated filers to provide the auditor attestation under Section 404(b). I know that, as a result, there is uncertainty among investors and among non-accelerated filers about whether and when compliance with Section 404(b) would actually be required," said Aguilar. "The Commission is for the first time resolving that uncertainty by making it clear that all public companies, regardless of size, will be required to comply with Section 404(b) of the Sarbanes-Oxley Act, and that non-accelerated filers will begin complying in their first annual report for fiscal years ending on or after June 15, 2010."
For more information, visit the SEC's website at www.sec.gov.
Jacob Barron, NACM staff writer. Follow us on Twitter at http://twitter.com/NACM_National.