U.S. Chamber of Commerce - February 1 - Chamber Applauds SEC Delay on SOX 404

Chamber Applauds SEC Delay on SOX 404

WASHINGTON, D.C.-The U.S. Chamber of Commerce today applauded the Securities and Exchange Commission (SEC) for proposing a one-year extension of Sarbanes-Oxley (SOX) Section 404(b)-the requirement for an auditor's opinion-for small businesses.

"This is an important step for small businesses, especially during difficult economic times" said Michael Ryan, senior vice president and executive director of the U.S. Chamber Center for Capital Markets Competitiveness. "The delay would reduce unnecessary audit costs in 2008 and provide an additional year for small businesses and their auditors to learn from the experience of larger companies."

The implementation of Section 404 has led to costs and regulatory burdens far beyond what Congress intended and well in excess of the benefits to shareholders and companies, according to the Chamber. And this burden would have fallen disproportionately on smaller public companies.

The Chamber submitted comments to the SEC and the Public Company Accounting Oversight Board (PCAOB) last year expressing concerns over continued ambiguity within Section 404 and its harmful impact on smaller companies. It also released a report showing that, despite recent reforms, Section 404 disproportionately burdens small businesses. The Chamber has also testified before the House Small Business Committee on the same subject calling for action.

Last May, the SEC and PCAOB took steps to reduce the burden of Section 404 compliance by promulgating management guidance and a new audit standard, but the data necessary to assess the effectiveness of these steps will not be fully available until late second quarter of this year. Companies, however, would have to begin engaging auditors and consultants now to ensure compliance with the original dates.

"We also applaud the SEC's effort to study over the next several months the costs of Section 404 under the new rules and look forward to working with the SEC and business community in this effort." said Ryan. "It's critical that these and other regulatory costs are minimized to the extent possible to ensure the greatest cost-benefit balance to businesses and shareholders."

The U.S. Chamber of Commerce is the world's largest business federation representing more than 3 million businesses and organizations of every size, sector, and region.