Small Businesses To See Extension on Accounting Rules
The nation's smallest public companies are going to get a one-year extension on complying with new accounting rules, according to testimony Wednesday from the head of the Securities and Exchange Commission.
SEC Chairman Christopher Cox told the House Small Business Committee that his agency plans to postpone for a year the requirement that all businesses comply with the so-called Sarbanes-Oxley rules, often shortened to SOX. Compliance now would begin in 2009.
The 2002 law, named after the congressmen who spearheaded the legislation, was created in the aftermath of major corporate scandals to try and stave off accounting fraud and shore up shareholder trust. However, many members of the small business community balked at portions of the law, saying the increased regulations and paperwork were unfairly burdensome.
Under SOX section 404, companies must provide annual reports assessing internal controls over financial reporting and an independent auditor must verify their assessment.
The chairwoman of the committee, Nydia Velazquez (D-N.Y.), recently released a report showing that 66 percent of small firms had already brought on an outside auditor to help them comply with the law. Some of those companies said that "SOX 404" requirement would represent more than 3 percent of their net income.
The leaders of the Senate Small Business Committee applauded the news, as did the U.S. Chamber of Commerce, the Independent Community Bankers of America and other business groups.
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