The Center for Audit Quality urged leaders of the Senate Banking, Housing and Urban Affairs Committee to resist efforts to exempt small businesses from compliance with Section 404(b) of the Sarbanes-Oxley corporate reform act of 2002, according to a statement today by the accounting public policy organization.
“If, as proposed by some members of the House of Representatives, Congress agrees to a permanent waiver for small companies, there may be little independent scrutiny of financial reporting safeguards at an estimated 6,000 small companies,” Cynthia M. Fornelli, CAQ executive director, wrote in a letter to committee Chairman Christopher J. Dodd, D-Conn., and Richard C. Shelby, R-Ala., the ranking minority committee member.
“Reporting under Section 404 provides investors with meaningful information regarding a company's internal control over financial reporting,” the letter said. “In addition, we believe that the required independent audit of management's assessment of the effectiveness of (a company's internal control over financial reporting), as required by SOX Section 404(b), has been” important in achieving oversight objectives of the act.
“Weakening this critical element of SOX at a time of lingering economic uncertainty may appear to be a step forward for small companies, but in reality it is two steps backward for investors,” Ms. Fornelli wrote in the letter.
The CAQ is an organization of U.S. accounting firms registered with the Public Company Accounting Oversight Board.