WASHINGTON, DC – A study by the US Chamber of Commerce has shown that, despite recent reforms, Sarbanes-Oxley Section 404 disproportionately burdens small businesses. In light of the new report, the Chamber has again called for a one-year delay in small company implementation and has urged Congress to hold hearings on the issue.
“Our study shows why small companies complying for the first time with SOX 404 should not be the guinea pigs for the improved rules adopted by the SEC and the PCAOB,” says Michael Ryan, senior vice-president and executive director of the US Chamber's Center for Capital Markets Competitiveness. “We continue to support strong internal controls and believe the improved rules, if implemented as intended, will address the challenges companies face.”
Without the delay, non-accelerated filers with a calendar year-end would be required to begin complying with SOX 404(a) in early 2008 and SOX 404(b) in early 2009. The SEC did not expect non-accelerated filers to engage auditors for SOX 404 compliance until the first half of 2008, but more than 83% of respondents have already done so with respect to SOX 404(a) and more than 58% have done so with respect to SOX 404(b).
The study also shows that at least half of companies with less than $75 million in market value will spend more than 3% of net income on SOX 404(a). Sixty-three percent anticipate a cost increase in the next year due to compliance with 404(a) and 404(b). Lastly, more than 58% of the respondents believe SOX 404 will not help detect and prevent fraud.