It's no big secret that the House of Representatives passed sweeping financial reform legislation last month, nor that the legislation includes a provision that would at least delay Sarbanes-Oxley 404(b) compliance for U.S. public companies with a market capitalization of less than $75 million. It might even exempt them altogether.
It's also clear that unless the Senate acts on its own version of financial reform quickly, the June 15 deadline for non-accelerated filers to begin complying with Sarbanes-Oxley 404(b) will arrive before that delay or exemption can take effect.
More than that, though, those opposed to the exemption may have a little more ammunition with which to fight. Monday, Vibato's Teresa Bockwoldt alerted me to the $31 million theft headphone maker Koss allegedly suffered at the hands of its then-VP of finance. She noted that some observers may argue that a Sarbox exemption for smaller companies could lead to similar losses.
The well-known manufacturer of headphones reported $38.3 million in sales last year, so a $31 million theft, even over five years, suggests some serious problems with internal controls...Koss fired its accounting firm, Grant Thornton, [which] responded by pointing out that Koss is among those companies not yet subject to Sarbox's Section 404(b)... 'The company did not engage Grant Thornton to conduct an audit or evaluation of internal controls over financial reporting,' says a spokesperson.
So even with President Obama urging legislators to press forward on financial reform, they may decide to wait on the Sarbox delay/exemption. Whether the legislation passes soon without the exemption, or the legislation is still pending when the June 15 deadline rolls around, Bockwoldt says SMBs should be preparing for 404(b) now.