Citing the disproportionate costs of Sarbanes-Oxley on small filers, GOP Senators Olympia Snowe of Maine and Mike Enzi of Wyoming are urging the Securities and Exchange Commission to adopt "clear and practical" rules for small businesses with regards to SOX compliance.
The lawmakers' stance on SOX came as they released the results of a Government Accountability Office study they had requested on the impact of SOX on small filers.
The report titled, "Sarbanes-Oxley Act: Consideration of Key Principle Needed in Addressing Implementation for Smaller Public Companies," found that small business compliance costs for SOX internal controls were disproportionately higher than larger businesses, there was a significant increase in companies going private to avoid compliance costs and that there had been a considerable increase in audit fees since the 2002 passage of SOX.
"Senator Enzi and I requested this Government Accountability Office study to determine the burdens that the Sarbanes-Oxley Act may impose on small business owners, which include harming their ability to obtain capital," said Snowe, in a statement.
Enzi and Snowe, chairs of the Senate Committee on Small Business and Entrepreneurship and Senate Committee on Health, respectively, pointed to some of the GAO's key findings, including:
- Public companies with market capitalization of $75 million or less paid a median $1.14 in audit fees for every $100 of revenues compared to $0.13 in audit fees for public companies with market capitalization greater than $1 billion; and,
- The number of public companies that went private has increased significantly from 143 in 2001, to 245 in 2004, with the greatest increase occurring during 2003.
"Small businesses are the primary force behind the American economy," said Enzi, in a statement. "They employ millions of American workers and keep our economy growing and productive. Yet, the same small companies are hit hardest by the cost of regulatory compliance. We need to look for ways to lessen the impact of Sarbanes-Oxley implementation on these companies."Snowe and Enzi highlighted a particular GAO recommendation that urged the SEC to consider the "size, the unique characteristics of smaller public companies and the knowledge base, educational background, and sophistication of their investors" during the implementation of Sarbanes-Oxley requirements.
