The Securities and Exchange Commission has again delayed the deadline for small public companies to begin providing an audited assessment of internal controls over financial reporting, but said this will be the last time.
Small companies will need to start providing such reports in nine months time, instead of three months from now. In other words, the extension that the SEC had previously granted will expire starting with the annual reports of companies whose fiscal years end on or after June 15, 2010. The expiration date previously had been for fiscal years ending on or after Dec. 15, 2009.
The assessment, which large public companies have needed to provide to comply with Section 404(b) of the Sarbanes-Oxley Act of 2002, has been repeatedly postponed for small companies by the SEC because of complaints about the high expense. The SEC agreed to conduct a study by its Office of Economic Analysis of whether some additional guidance provided to company managers and auditors in 2007 was effective in reducing the costs of compliance. The study is now available on the SEC Web site.
However, because the study was published just last month, less than three months before the Dec. 15 deadline, the SEC decided that an additional extension would be appropriate and reasonable to allow small public companies and their auditors to better plan for the required auditor attestation.
The SEC is determined to make this the final extension. 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), said SEC Commissioner Luis Aguilar in a statement. 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. In light of this uncertainty, I want to highlight that in today's deferral, 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.
Aguilar emphasized that he and Chairman Mary Schapiro wanted to assure investors that there would be no further extensions of the compliance deadline.
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, said Schapiro.
While the reporting and auditor-attestation grew out of the 2002 law passed by Congress, all U.S. public companies have been required to maintain internal accounting controls since 1977, the SEC noted.
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