The congressional conference committee reconciling the House and Senate versions of the federal financial reform bill agreed to include an exemption on compliance with Section 404(b) of the Sarbanes-Oxley Act of 2002 for companies with less than $75 million in market capitalization. Section 404(b) requires a registrant to provide an attestation report on management’s assessment of internal controls over financial reporting by the registrant’s external auditor. On October 13, 2009, the Securities and Exchange Commission (SEC) issued a final rule, Internal Control over Financial Reporting in Exchange Act Periodic Reports of Non-Accelerated Filers, requiring all nonaccelerated filers to begin complying with Section 404(b) beginning with their annual reports for fiscal years ending on or after June 15, 2010. The exemption in the House-Senate bill, if ultimately enacted as currently reconciled, would effectively negate the SEC’s final rule and provide a permanent exemption from the auditor attestation requirement for eligible smaller companies. Disclosure of management attestations on internal control over financial reporting under existing Section 404(a) would continue to be required for smaller companies.
The conference committee has also agreed to direct the SEC to conduct a study on how to reduce the cost of complying with the internal control audit requirements for companies with market capitalizations between $75 million and $250 million.
The congressional committee reconciling the House and Senate versions of the financial reform bill continues to negotiate differences, and further changes to provisions may occur, including those associated with exempting smaller companies from Section 404(b). Any final federal financial reform bill must still be approved by both chambers of Congress and signed into law by the President before any of its provisions, including the exemption from 404(b) reporting, are effective.
Read more information about the House-Senate conference reconciling the federal financial reform bill.
The text of the exemption on compliance with Section 404(b) included in the reconciled House-Senate bill is available in this PDF document: http://ht.ly/22JUG.
Nicole Saldamarco, Internal Audit Manager, was also a contributor to this Insight.
Note: ht.ly is a URL shortener. If you click the link, you will be directed to the PDF.
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