|  | | 2009 News and Press Releases | | |
HEADLINE NEWS:
Does Sarbox Reduce Restatements?, While Small Companies Lobby To Limit Their Compliance With The 2002 Law, A New Study Suggests It May Provide A Key Benefit.
Sarah Johnson
CFO.com. December 2, 2009
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EXCERPT: A recent study could give some fodder to opponents of the movement toward exempting small publicly traded companies from the auditor-attestation requirement of the Sarbanes-Oxley Act. And it could deflate the hopes of small-company CFOs who are praying for the exemption. The study, from research firm Audit Analytics, suggests companies that have not yet had their auditors review their internal-control reports are more likely to have a restatement than larger companies, even though they claimed to have effective controls. "The whole process of reviewing your internal controls is supposed to improve the reliability [of financial reporting] and therefore should decrease the number of restatements," notes Don Whalen, research director at Audit Analytics. Looking at filings made between November 2007 and November 2008, the firm found that 5.1% of companies that both reported effective internal controls and had their auditors attest to those controls later restated their financial results. In contrast, 7.4% of companies that reported effective controls but did not get their auditors' signoff later had at least one subsequent restatement. In effect, the Audit Analytics report suggests, the restatement rate for nonaccelerated filers is 46% higher than it is for accelerated filers. As it stands now, nonaccelerated filers — companies with market capitalizations under $75 million — have less than a year to get their auditors to weigh in on their internal controls. Only a "handful" of these companies already do, voluntarily, according to Whalen. The smaller companies will have to file these audit opinions with annual reports filed for fiscal years ending after June 15, 2010. However, that deadline could evaporate if an amendment attached to the Investor Protection Act — a key bill included in the package of reform legislation getting heavy attention on Capitol Hill — survives. |
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