- The Washington Times - Saturday, February 2, 2008

ASSOCIATED PRESS

Small public companies won’t have to comply with an internal-controls audit requirement for an additional year under a proposal announced yesterday by the Securities and Exchange Commission.

The SEC, which has repeatedly postponed the requirement for smaller firms, said it voted 4-0 on Thursday for a one-year extension, and will seek comment on it for 30 days. The delay means the smallest U.S. public companies won’t have to comply with the internal-controls audit requirement until fiscal years ending on or after Dec. 15, 2009, which the SEC said will give it time to collect and analyze “real world” compliance costs associated with such audits. Smaller firms won’t get a break on a related requirement to have corporate managers review internal financial-reporting controls, however.

Congress ordered closer scrutiny as part of the 2002 Sarbanes-Oxley Act, calling for corporate managers to make an annual assessment of their internal controls over financial reports, subject to further review by their outside auditor. Larger companies already subject to the requirements have complained about the costs, and smaller firms have raised concerns that the regulatory burden could be crushing. The oversight board for accountants has since modified its standards for internal-controls reviews, and the SEC issued guidance intended to help managers conduct reviews.

Sen. John Kerry, Massachusetts Democrat, chairman of the Small Business and Entrepreneurship Committee, and Sen. Olympia J. Snowe of Maine, the highest-ranking Republican on the committee, both praised the relief for smaller firms, which they had requested previously.

“It takes small businesses more time and money to comply with Sarbanes-Oxley than larger businesses, so I’m pleased that the SEC granted small firms an extension and initiated this study,” Mr. Kerry said in a statement yesterday.

Mrs. Snowe said the money that small businesses would have spent on the additional compliance efforts can instead be put toward “creating jobs and strengthening our economy.”

The U.S. Chamber of Commerce also applauded the SEC’s move, saying it will reduce audit costs for smaller companies and give them and their auditors more time to learn from the experience of larger companies already doing the internal-controls reviews.

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