SOX for non-accelerated filers – another extension?
Sarbanes-Oxley Section 404(b) currently requires all non-accelerated public companies to get an outside auditor review of internal controls, effective for companies with fiscal year-ends on or after June 15, 2010. This means those non-accelerated filers who have previously received extensions to this requirement year after year, finally must comply with an internal control audit. Or do they?
When discussing the current extension, which was granted October 2009, SEC Chair Mary L. Schapiro clearly stated “there will be no further Commission extensions.” But in November 2009 the House of Representatives passed a bill giving non-accelerated filers a permanent extension to the auditor attestation requirements. For the bill to become law it must be approved by the Senate and that is where it currently sits. It seems the possibility of the Senate passing the bill by June 15 is unlikely, the Republicans are not interested in reform and the Democrats have a weak effort to push the bill along. If this bill passes at all, it will probably be later in the year.
So, what is the non-accelerated filer to do? My advice to them, get ready for a controls audit but wait one more month to bring in the auditors. If the SEC Chair goes against her own words and issues another extension, it will be granted very soon to affect the June filers.
The small public filers have been complying for years with the management assessment requirement of Sarbanes-Oxley Section 404(a) and should have key controls defined and assessed, ready for audit. If this documentation is less than formal, make sure to document those controls now. Bring in the auditors in Q4 if, and when, attestation is assured.
SOX 404(B)is tied to a much larger part of the bill to be passed and I am doubtful the bill will be pushed through the Senate. Accountability wanes without monitoring. Investors are the ultimate losers when compromise is accepted over doing what is right. I’ve said this before. No one can show the benefit of SOX because corporations are not required to show the changes they’ve had to make to right their company. I admit, sign-offs and compounded controls don’t make sense, but that is the coporations answer to control. When your top executives make their people accountable, then you see the benefit of Sox and the streamlining of activities that make processes more visible and efficient. That has a dollar value on time spent. Naturally, the SEC won’t be able to show this benefit from their perch but secretly, these executives that care about the health of the company (monetary and work environment) know the benefit and can see it. Others don’t really care but to save money on audit fees, risk the shareholders investment for their profit margin and ultimately, their bonuses. I’m an investor…my money goes to companies that care about doing things right.