SEC Seeks Public Input on Sarbanes-Oxley
August 11, 2005--The Securities Exchange Commission's Advisory Committee on Smaller Public Companies is seeking public input on the impact of the Sarbanes-Oxley Act of 2002 on smaller-sized businesses.
In a survey on its website, the committee posted 29 questions for small business CEOs. Topics ranged from the effect of Sarbanes-Oxley on "this country's culture of entrepreneurship" as a whole to more specific issues weighing particular costs and benefits of Sarbanes-Oxley Section 404, which outlines management assessment of internal controls. The committee requested that answers be submitted by August 31 in order to be considered for a formal report to the SEC in April 2006.
The solicitation came after almost three years of debate surrounding the controversial act, which was instated in 2002 to correct corporate governance corruption by mandating specific procedures for financial and governance procedures, documentation, and reporting.
According to Gerald Laporte, chief, office of small business policy, the survey received 42 responses on its first day. From those responses, which will be made publicly available, the committee has already formed at least one recommendation to be voted on at their meeting in Chicago this week. Laporte said the recommendation regarded "extending the compliance date for certain companies to meet requirements for Sarbanes-Oxley Section 404."
Sarbanes-Oxley has sparked debate in part because of the claim by some small businesses that compliance was too costly and discouraged them from taking their companies public. According to a June PricewaterhouseCoopers' Trendsetter Barometer, about 30% of fast-growing private companies have either adopted Sarbanes-Oxley regulations or plan to. However, with an average annual cost of $138,000 and a 34% increase in audit costs to private companies who choose to comply, Sarbanes-Oxley has caused many small businesses to question whether the benefits of compliance actually outweigh the costs.