To Audit IC or Not to Audit IC

That is the question.
Small public companies with less than $75 million of public equity may get another one-year reprieve from having to comply with one of the provisions of the 2002 Sarbanes-Oxley Act.  The Wall Street Journal (December 13, 2007, page C4) reports that SEC Chairman Christopher Cox is considering submitting a formal proposal in early 2008 that would exempt such companies from the rule requiring that they have their internal accounting controls audited and reported on by an outside auditing firm.  Meanwhile, the SEC will continue conducting a study on the estimated costs of complying with the external-auditor review provision to determine whether to phase in that requirement for small public companies in 2009, or propose a further delay or modification to the Act.
The chairwoman of the House Small Business Committee has gone on record in favor of the delay, pending results of the study.  If the delay is approved, most small public companies will likely breath a sigh of relief, while shareholder advocacy groups will likely express their angst at what they perceive to be yet another move to undermine the important shareholder protections called for by Sarbanes-Oxley.
Of course, voluntary compliance with the internal control review provisions remains an option for any small business and can help the board and management convey to investors their strong governance values.  A thorough assessment of the costs and benefits (both real and intangible) should precede any such decision.  PondelWilkinson is uniquely qualified, together with legal counsel, to assist your board and management in weighing the available options. 



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