SEC Releases Long-Awaited Study on SOX

This week, the U.S. Securities and Exchange Commission ("SEC") released its study on the impacts of section 404(b) of the Sarbanes-Oxley Act ("SOX"). The SEC concluded that section 404(b) which requires an external auditor to issue an opinion on a company's internal control over financial reporting should remain effective for mid-sized companies with a market capitalization of $75 to $250 million. Here is a summary of their conclusion and recommendations:

The work performed by the Staff reinforces our understanding that the costs of Section 404(b) have declined since the Commission first implemented Section 404, particularly in response to the 2007 reforms, that investors generally view the auditor‘s attestation on ICFR as beneficial, and that financial reporting is more reliable when the auditor is involved with ICFR assessments.

1. Maintain existing investor protections of Section 404(b) for accelerated filers, which have been in place since 2004 for domestic issuers and 2007 for foreign private issuers.

2. Encourage activities that have potential to further improve both effectiveness and efficiency of Section 404(b) implementation.

Since the Dodd-Frank Act exempted small companies with a market capitalization less than $75 million from section 404(b), this study should effectively end the debate over Sarbanes-Oxley section 404 requirements. For mid-size companies looking to gain efficiencies in complying with section 404(b), Wheelhouse Advisors can help. Email us at NavigateSuccessfully@WheelhouseAdvisors.com to learn more.

The Sarbanes-Oxley Countdown is Extended for a Final Time

The U.S. Securities and Exchange Commission ("SEC") announced last week that the deadline for full compliance with Section 404 of Sarbanes-Oxley Act for small companies has been extended for an additional and final nine months.  The primary reason for this final extension is the delayed publication of the formal study on the impact of changes to the compliance requirements made in 2007.  Here is the formal release from the SEC.

This extension of time will expire beginning with the annual reports of companies with fiscal years ending on or after June 15, 2010. This expiration date previously had been for fiscal years ending on or after Dec. 15, 2009. The extension was granted so that the SEC’s Office of Economic Analysis could complete a study of whether additional guidance provided to company managers and auditors in 2007 was effective in reducing the costs of compliance. Because the study was published less than three months before the December 15 deadline, the Commission determined that additional time is appropriate and reasonable so that small public companies and their auditors can better plan for the required auditor attestation.

“Since there will be no further Commission extensions, it is important for all public companies and their auditors to act with deliberate speed to move toward full Section 404 compliance,” said SEC Chairman Mary L. Schapiro.

So, the final clock is ticking.  Does your company need help implementing a cost-effective compliance program?  If so, Wheelhouse Advisors can help.  Visit www.WheelhouseAdvisors.com to learn more.