SEC Recommends Sarbox 404(b) Compliance for Mid-sized Firms

Lora Bentley
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Sarbox Compliance: Benefits Beyond the Checkbox

When the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) became law, it granted small-cap companies an exemption from the auditor attestation requirements in Sarbanes-Oxley 404(b). It also called for the Securities and Exchange Commission to study whether mid-sized companies would benefit from the same exemption.


This week, the SEC's Office of the Chief Accountant released the results of that study, Reuters reports. As far as the SEC is concerned, mid-sized companies - those with market capitalization between $75 million and $250 million - should not be exempt from the requirements. According to the study, the costs of complying with 404(b) have declined significantly of late. Moreover, according to the study:

The staff did not find any specific evidence potential savings [resulting from an exemption] would justify the loss of investor protections and benefits [of 404(b) compliance].

Reacting to the report, Center for Audit Quality Executive Director Cindy Fornelli said, in part:

We hope this study will effectively discourage further discussions around ways to dilute the investor protections contained in Sarbanes-Oxley.

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