Smaller Companies and Sarbanes-Oxley

Given all the evidence, can someone please explain to me why the SEC and the PCAOB would ever consider weakening Sarbanes-Oxley or their enforcement efforts? Maybe they like having the companies make mistakes and pay them fines? Maybe there’s even more going on that everyone would rather keep under the rug?

More charges and lawsuits are settled, out of the limelight, than ever go to trial or hit the major media. Why would anyone…

  • work for,
  • sell to,
  • audit,
  • lend money to,
  • depend on as a customer, or
  • count on for a pension

…a smaller company that believes it is “too much trouble and too costly” to document key processes that insure the integrity and completeness of financial reporting?

What’s amazing is that even when reporting the success of the act, the media uses words like “onerous” to descibe Sarbanes-Oxley!

AccountingWEB.com – Dec-19-2006 – In what may be a cautionary notice to auditors of small public companies, recent research shows that financial report restatements are increasing at small businesses that have been exempt from the onerous 404 provision of the Sarbanes-Oxley (SOX) accounting reform act, but dropping for companies that do follow 404.

The number of restatements filed by public companies to correct accounting errors during the first nine months of this year versus the same period in 2005, rose 45 percent for small “micro-cap” companies, that have been exempt from 404, according to a recent report. The 404 provision requires companies to establish and maintain internal controls for financial reporting and prepare annual reports of the control processes. Public companies that have been following the 404 rule have seen steep declines in their restatements.