SEC Announces One Year Extension of Auditor Attestation Requirements in Sarbanes-Oxley Act for Small Companies
By: ALEXANDER ROSENSTEIN
August 2008
On June 20, 2008, the SEC announced a further extension of the compliance date for smaller public companies to meet the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act. Public companies that are not large accelerated filers or accelerated filers will now be required to provide an auditor attestation report on management’s assessment of internal controls over financial reporting in annual reports for fiscal years ending on or after December 15, 2009. Smaller public companies must continue to provide management’s assessment of internal controls during this extension period.
The SEC stated that it believes the one year extension is appropriate so that smaller companies do not incur unnecessary compliance costs. The extension also allows additional time for (i) these companies to consider the PCAOB’s upcoming guidance on internal control audits of smaller companies when it is finalized, and (ii) for auditors to incorporate this guidance in their planning and conduct of internal control audits for 2009.
Larger public companies, comprising more than 95% of the market capitalization of U.S. equity securities markets according to the SEC, have been subject to the auditor attestation requirements since 2004. Under applicable SEC regulations, a “large accelerated file” is an Exchange Act reporting company with a worldwide market value of outstanding voting and non-voting common equity held by non-affiliates of $700 million or more, and an “accelerated filer” is a reporting company with market value of at least $75 million and less than $700 million.
The SEC also announced that it will proceed with data collection for a study of the costs and benefits of Section 404 implementation, in particular with respect to the consequences for smaller companies and the audit attestation requirements. The SEC expects to release the results of this study during the extension period.
For more information, please contact a member of our Securities Group.