On January 31, the Securities and Exchange Commission proposed to amend the temporary rules implementing Section 404(b) of the Sarbanes-Oxley Act of 2002 that require companies that are non-accelerated filers to include in their annual reports, an attestation report of their independent auditor on internal control over financial reporting for fiscal years ending on or after December 15, 2008. The proposed amendments postpone by one year the Section 404(b) auditor attestation requirements for smaller companies, and non-accelerated filers would not be required to provide the auditor’s attestation report on internal control over financial reporting until the filing of annual reports for fiscal years ending on or after December 15, 2009.
The postponement will allow the SEC to complete a cost-benefit study to assess whether, under the newly issued guidance for management and the new auditing standard, the Section 404(b) auditor attestation requirements of the Sarbanes-Oxley Act are being implemented in a manner that will be cost-effective for smaller reporting companies. The study will collect and analyze extensive “real world” cost and benefit data from a broad array of companies currently complying with Section 404 under newly issued guidance for companies and auditors. The study will have two main parts:
- A Web-based survey of companies that are subject to Section 404; and
- In-depth interviews including companies that are just now becoming compliant.
The SEC will be accepting comments on the proposed extension to the auditor attestation requirement for smaller companies for 30 days after publication in the Federal Register.