According to the Wall Street Journal, the latest extension would give companies with market capitalization of up to $75 million until July 2007 to comply with the rule.
The internal-controls rule, under the 2002 Sarbanes-Oxley law, requires that companies assess the controls they have in place to prevent accounting mistakes and fraud and have their external auditor attest to those controls. The assessment must be included in the company’s annual report, along with a description of any “material weaknesses” found.
Small businesses have complained much about the effect the rule will have on their budgets. In response to the complaints, the SEC invited public comment to its newly formed Advisory Committee on Smaller Public Companies (See SEC Seeking Small Firm SOX Impact Input ). According to the WSJ, the committee recommended that the SEC give small businesses an extra year before required compliance, saying that companies were struggling to find resources to assess their controls in a timely manner.
In a letter to SEC Chairman Chris Cox, the committee said the costs “have been far more expensive than originally forecasted and these costs are disproportionately larger for smaller companies,” according to the WSJ.
On a separate issue, the SEC said it will give banks another year to meet registration requirements for brokers, extending the deadline until September 30, 2006. The WSJ reports that the SEC said it doesn’t expect banks to develop systems needed to comply with the rule until the agency finishes its own work in this area.