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Sarbanes Oxley 404 (SARBOX 404) Compliance Extended

Sarbanes Oxley 404 (SARBOX 404) Compliance Extended

by Rick Turoczy on August 11, 2006

If approved, the good news is that small public companies not previously required to comply with SARBOX 404 now have a two-pronged approach beginning with year-ends after December 15, 2007. The Form 10-K filed after this date will require management’s assessment. The following reporting year-end the company will be required to have an auditor’s attestation report on internal controls over financial reporting (an integrated audit).

It appears the SEC will stick to its requirement that all registrants comply and this is the last compromise they intend to give. It’s apparent this delay was given due to the outcry from non-accelerated filers over the cost experienced by the accelerated filers due to the over zealousness of the audit firms involved; mainly the Big Four. I have always espoused that the extent of documentation, testing and monitoring that the accelerated filers experienced was not the intent of the Sarbanes Oxley Act of 2002.

If you read the Sarbanes Oxley Act of 2002, it is specific in internal controls over financial reporting, and this does not include all internal controls over safeguarding of assets and information. Yes, it is a good idea and good business to have strong internal controls over safeguarding of assets, but this does not extend to excessive costs from audit firms in requiring and testing the controls that have no material impact on financial reporting.

Sarbanes Oxley 404 (SARBOX 404) Compliance Extended

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