WASHINGTON – Today Senators John Kerry (D-Mass.) and Olympia Snowe (R-Maine) praised the U.S. Securities and Exchange Commission (SEC) for granting small public companies a one-year extension to comply with auditing requirements under Sarbanes-Oxley while a cost-benefit study is conducted. Last year, Kerry and Snowe held a hearing on this issue and advocated for an extension for small firms. Kerry has previously called for a task force to be established to report on how to assist small public companies comply with Sarbanes-Oxley.
“It takes small businesses more time and money to comply with Sarbanes-Oxley than larger businesses, so I’m pleased that the SEC granted small firms an extension and initiated this study,” said Senator Kerry, Chairman of the Committee on Small Business and Entrepreneurship. “We can do more to ease the regulatory burden on small firms and help encourage more small businesses to become public companies – while still requiring them to comply with the law to ensure transparency and honest accounting.”
“Small businesses already face a disproportionate burden when it comes to complying with Federal regulations, and it is critical that they are not forced to unnecessarily divert resources from creating new products and jobs,” said Senator Snowe, Ranking Member of the Small Business and Entrepreneurship Committee. “The resources they spend addressing federal mandates could instead be spent on creating jobs and strengthening our economy.”
According to the SBA Office of Advocacy, businesses that employ fewer than 20 people spend $7,647 per employee in regulatory compliance costs, which is close to 45 percent more than the $5,282 spent per employee for businesses that employ more than 500 people. Senator Snowe added, “When you consider that businesses that employ fewer than 20 people spend more than $2,000 per employee in regulatory compliance costs than businesses who employ more than 500 people, it’s painfully clear that we could be doing more to help small businesses succeed. I am pleased that the SEC has taken steps today to help address and rectify this discrepancy.”
Kerry and Snowe previously requested a one-year extension of the Section 404(b) auditor attestation requirement for smaller companies that the SEC formally adopted yesterday. According to the SEC, the cost-benefit study will examine Section 404(b) of Sarbanes-Oxley which requires auditors to attest to small public company financial reports. The SEC study will collect and analyze extensive “real world” cost and benefit data from a broad array of companies currently complying with Section 404 under newly-issued guidance for companies and auditors. The new guidance for management and the new auditing standard were intended to reduce the compliance costs of Section 404 while strengthening its focus on material controls.