The letter, addressed to the current SEC chairman,
Christopher Cox, and William Gradison, acting chairman of
the Public Company Accounting Oversight Board, said that
the proposal for exemption is "misguided" and "goes too
far" in addressing concerns of small businesses,
according to the Wall Street Journal.
After receiving many complaints from smaller
companies about the impact of the Sarbanes-Oxley (SOX)
internal controls rule on their budgets, the SEC again
extended the deadline for SOX compliance for those
companies with market capitalization of up to $75
A survey last year found that the average compliance
bill for SOX came to $16 million, and a later survey said
that those costs were not likely to decline for companies
with market capitalization less than $120 million
Small Cos Won't See SOX Implementation
In response to the cost complaints, an SEC advisory
panel made a recommendation in December that would lead
to exempting an estimated 80% of public companies from at
least part of the rules, the WSJ reports. Companies with
market values below about $125 million would be exempt
from the rules entirely; others would face relaxed
variations on the rules.
Exempting smaller companies from the
internal-controls rules would be a mistake, according to
the letter, which said, "When new accounting and
corporate-fraud scandals develop, as they surely will,
people will ask who was responsible for a policy decision
resulting in such sweeping exemptions."
The letter was also signed by John Bogle, the
former chairman of Vanguard Group Inc.; John Biggs, the
former chairman and chief executive of pension company
TIAA-CREF; and Charles Bowsher, former US comptroller
general and former head of the Public Oversight Board,
the PCAOB's predecessor in regulating the accounting
Bowsher said in an interview that the exemption
proposal "basically is undermining the whole thrust of
the Sarbanes-Oxley legislation - to get better reporting,
Meanwhile, the SEC and PCAOB announced February 16
that they will sponsor a roundtable May 10, 2006, at the
Commission's headquarters in Washington, D.C., to discuss
second-year experiences with the reporting and auditing
requirements of the SOX internal controls rule.
In addition, the agencies announced they are
seeking written feedback from registrants, auditors,
investors and others on their experiences with complying
with the Section 404 requirements.
The announcement, with directions for making
The deadline for submissions is May 1, 2006.