Chief Counsel for Advocacy Thomas M. Sullivan today commended the U.S. Senate Committee on Small Business & Entrepreneurship for holding a hearing on the impact of Section 404 of the Sarbanes-Oxley Act on smaller public companies.
In written testimony, Sullivan said, "The topic of how the Sarbanes-Oxley Act impacts small business is an important one, and the small business community will benefit by this Committee's focus on the proposals under consideration by the Securities and Exchange Commission (SEC) and the Public Company Accounting Oversight Board (PCAOB)."
Sullivan noted that Advocacy's involvement with the issue began in 2002 when the office asked then Chairman Oxley and Chairman Sarbanes to include flexibility in their bill sufficient to avoid unnecessary impacts on small public firms. Since then, Advocacy has issued several comment letters to the SEC and the PCAOB, held public roundtables, and given testimony before the U.S. Congress.
Sullivan said that "There is a compelling record demonstrating that the costs of complying with Section 404 are large and disproportionately high for small public companies ... Advocacy believes that the excessive cost of Section 404 internal controls reporting may restrict a new generation of small innovative companies from seeking capital in the U.S. capital markets."
Based on years of involvement in the issue Sullivan said, "Advocacy strongly recommends that the SEC continue to provide further extensions for small public companies until such time as more cost-effective procedures for internal controls can be developed." Additionally, he urged Congress to exempt smaller public companies from Section 404(b). These recommendations are consistent with a report from the SEC's own Advisory Committee on Smaller Public Companies. As the Advisory Committee has pointed out, Section 404 compliance costs in relation to revenue will be disproportionately borne by smaller companies.
The Office of Advocacy, the "small business watchdog" of the federal government, examines the role and status of small business in the economy and independently represents the views of small business to federal agencies, Congress, and the President. It is the source for small business statistics presented in user-friendly formats, and it funds research into small business issues.
For more information and a complete copy of the testimony, visit the Office of Advocacy website at www.sba.gov/advo.
Washington - April 18, 2007
Release Number: 07-13 ADVO
Contact: John McDowell, (202) 205-6941,
john.mcdowell@sba.gov
Information courtesy of the Small Business Administration.
