Grow With Us!
If you are the Chief Financial Officer or Controller at a small cap public company, or an SEC attorney, then Daszkal Bolton would like to bring to your attention a study recently released by the SEC that recommends that small cap companies be required to comply with the Internal Controls over Financial Reporting (ICFR) attestation requirements mandated by SOX Section 404(b).
Key Point: The SEC will not be waiving or changing the SOX 404(b) attestation requirement for publicly held companies whose market capitalization is between $75 and $250 million. The study concluded that costs of Section 404(b) compliance have declined and that financial reporting is more reliable when the auditor is involved with ICFR assessments. Importantly, the study found that investors generally view the auditor‘s attestation on ICFR as beneficial.
The study conducted by the SEC’s Office of the Chief Accountant was mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act. The main focus was to determine what, if any, steps should be taken to reduce the time investment and financial burden of compliance with SOX 404(b), while protecting corporate investors. The study was limited to companies with a market capitalization between $75 million and $250 million, and addresses the auditor attestation requirement with respect to an issuer’s internal control over financial reporting (ICFR) pursuant to Section 404(b). The study did not address management’s responsibility for reporting on the effectiveness their internal controls structure pursuant to Section 404(a) of the Sarbanes-Oxley Act. The study also included a review of whether the requirements to comply with Section 404(b) impact a company’s decision to list on U.S. exchanges.
The historical data provided the SEC with the following information about the benefits of ICFR attestation:
Based on the information collected from existing 404(b) implementations and other research, the SEC drew the following four conclusions which were critical in arriving at their recommendation:
The SEC’s recommendations demonstrate their continued commitment to “balance” the reduced regulatory burdens on small business capital formation with the need to maintain investor protection. In this respect, the SEC supports the retention of 404(b) audit requirements as they currently stand but does not recommend an extension of this exemption to issuers whose market capitalization is between $75 and 250 million.
Small cap SEC registered companies will not receive any new compliance exemptions! CONTACT US NOW! It is critical that your company plan ahead to be in compliance with SOX reporting requirements. For additional information, please call Vicki Wright, CPA, at 561-367-1040, or click here to email Vicki. In a brief consultation she can address your questions and concerns, and identify the best way to proceed.