|  | | 2007 News and Press Releases | | |
HEADLINE NEWS:
Looking For A Loophole In Reform Legislation, Small public firms balking at having to comply with federal accounting rules want a permanent exemption.
Cyndia Zwahlen
Los Angeles Times. December 20, 2007
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EXCERPT: Will small public companies -- many already dragging their feet on complying with important parts of the Sarbanes-Oxley corporate accounting reform legislation -- get their wish for a permanent exemption? That's the concern of some investors and accountants after Securities and Exchange Commission Chairman Christopher Cox surprised them last week when he proposed another delay -- the fifth so far -- in requiring the smallest public companies to follow one of the law's key reforms called Section 404. "This could be the death of 404 by a thousand deferrals," said Ann Yeger, executive director of the Council of Institutional Investors in Washington. The additional one-year delay, which the five-member commission probably would approve, would give the 5,000 or so of the smallest U.S. public companies until 2010 before they had to comply with Section 404's requirement to use an outside auditor to attest to the strength of their internal financial controls. That requirement, spelled out in Section 404 of the law, is considered a core part of the reform enacted in 2002 in the wake of the billion-dollar accounting scandals at Enron Corp., WorldCom Inc. and Tyco International Ltd., among others. The small public companies, which under SEC rules are those with a market capitalization of less than $75 million, didn't get another reprieve from the section's other requirement that they include a self-assessment of their internal controls in annual reports filed after Dec. 15. But some fear that a small public company will have little incentive to create or carry out the relevant checks of internal controls needed for the self-assessment because they don't have to worry about an outside auditor report for at least two more years, if ever. More delays may encourage those in Congress who support an exemption for small public companies as well as those who want to rework the entire law. "I'm concerned at this point a perpetual delay turns into a belief that it's going to be repealed," said Trent Gazzaway, managing partner of corporate governance at Grant Thornton, a major accounting and auditing firm based in Chicago. The longer the delay in implementing the rules, the longer small businesses have to lobby against it, said Matt Kelly, editor in chief of Compliance Week, a corporate governance newsletter based in Boston. "The small companies hate this," Kelly said. "Most have been doing nothing and hoping it will go away." |
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