SOX 404 Requirements Delayed for Small Businesses

The Securities and Exchange Commission recently approved a one-year extension of
the compliance date for smaller public companies to meet the auditor attestation
requirement of Section 404(b) of the Sarbanes-Oxley Act (SOX), meaning that
smaller companies will be required to start providing an attestation report in
their annual reports in fiscal years ending on or after December 19, 2009.
Additionally, the commission also announced that it had secured approval from
the Office of Management and Budget (OMB) to begin collecting data for an
analysis of the costs and benefits of the implementation of Section 404 and the
consequences that compliance may have for smaller companies.

An extension in the compliance date has been championed by congressional
small business leaders and regulators alike, with SEC Chairman Christopher Cox
first discussing the one-year delay in late 2007 and formally proposing it
before the House Small Business Committee in early 2008. The cost-benefit study
was first announced in February and is being led by the SEC’s office of economic
analysis with assistance from the office of the chief accountant and the
division of corporate finance. The study will include interviews and a web-based
survey in an effort to collect real-world data from a number of smaller
companies to determine what about Section 404’s requirements drive compliance
costs upward.

"Over the past few years, the commission and Public Company Accounting
Oversight Board (PCAOB) have committed extensive resources to improving the
efficiency and cost-effectiveness of the implementation of Section 404’s
requirements, particularly for smaller companies," said John White, director of
the SEC’s division of corporate finance. "I am optimistic that this study of
real-world data will help further inform our efforts to improve the
implementation of SOX 404."

Results of the survey are expected to be available before the new delayed
compliance date.