Key leaders in the House are reconsidering a provision in a bill that would exempt small and midsized companies from Sarbanes-Oxley audit requirements.
The House Financial Services Committee had passed an amendment that would exempt the companies from the Section 404(b) requirements in Sarbanes-Oxley for doing an outside audit of the effectiveness of their internal controls. The SEC has repeatedly delayed the requirements, but in October, it announced that companies with a public float below $75 million would need to begin complying in nine months time.
SEC Chair Mary Schapiro had argued against the provision in the House legislation. The American Institute of CPAs, the Center for Audit Quality and the Association of Certified Fraud Examiners have also protested the amendment, which the committee approved as part of the Investor Protection Act (see Critics Assail Small Co. 404 Exemption).
However, a more recently introduced amendment in the larger bill, now dubbed the Wall Street Reform and Consumer Protection Act, could change that. Introduced by Paul Kanjorski, D-Pa., the amendment would strike the provisions exempting public companies with less than $75 million in market capitalization from the requirements of the Sarbanes-Oxley Act related to the external audit of internal controls and replace with a study on methods to reduce the burden of compliance on small companies.
CAQ executive director Cindy Fornelli wrote a letter to Kanjorski, along with House Financial Services Committee Chairman Barney Frank, D-Mass., and other members to thank them. However, the amendment is just one of many controversial ones that the House has been debating in the bill, which would overhaul many other financial regulations and also set up a Consumer Financial Protection Agency. Another amendment that reportedly will be debated Friday would eliminate the agency altogether from the bill. The House is scheduled to vote on the final bill Friday, but it was still taking shape with a lot of moving parts seemingly still in motion.
Just to update this blog posting, the Kanjorski amendment was defeated on Friday before the final bill passed, so the earlier amendment exempting the small companies from the 404(b) audits was included in the final regulatory reform bill (see House Passes Financial Regulatory Reform Bill).