SEC SOX Survey
The SEC announced has extended from January 16 to January 31 the deadline for public companies to participate in a voluntary Web-based survey about the costs and benefits of Sarbanes-Oxley Act (SOX) Section 404. The Chamber strongly urges companies to participate in this survey. Participation allows small businesses an opportunity to provide input to the SEC on the impacts of SOX.

SOX Section 404 requires companies to conduct independent audits and internal management assessments of their internal controls over financial reporting (ICFR).

The cost-benefit study was announced by the SEC in February 2008 to assess the effect of previous measures taken by itself and the Public Company Accounting Oversight Board (PCAOB). In connection with the study, the SEC proposed a one-year extension of Section 404's auditor attestation requirement for smaller companies, which it later approved in June.

The survey is open to any company with Section 404 compliance experience in the United States or globally.

Results from the survey will inform its ongoing cost-benefit study of Section 404 implementation. The cost-benefit study has a special focus on the consequences for smaller companies, who are scheduled to begin complying with Section 404's independent audit requirements at the end of the year. It has been reported that more than 2,000 companies already have completed the survey.

Information about the SEC’s Section 404 survey project is available at www.sec.gov/spotlight/404survey.htm.

Please contact Tom Quaadman at (202) 463-5540 or tquaadman@uschamber.com with any questions.

Committee on Capital Markets Calls for Legal, Regulatory Reform

On November 30, 2006, the Committee on Capital Markets Regulation issued its Interim Report containing recommendations for regulatory reform. The Committee is a private sector of business and academic leaders. The report refers to the committee’s general conclusion that the solution to the competitive problem of U.S. capital markets lies, on the one hand, reducing the burden of litigation and regulation and, on the other hand, increasing shareholder rights.

The Sarbanes-Oxley Act (Section 404) is one of the issues where regulatory reform is needed. The Committee does not call for amendments to the regulation. However, it calls on the Securities and Exchange Commission (SEC) and the Public Companies Accounting Oversight Board (PCAOB) to provide guidance to improve cost-benefit balance, such as revised definition of materiality, rotational testing in support of annual assessment and encourage more use of judgment. After these changes are in place, depending on the result of the updated cost-benefit assessment, Congress may need to consider if special treatment for smaller companies is necessary. However, the Committee does not support one approach that has been suggested for smaller companies to limit the scope of auditors or management’s report to “design” control. The other areas where regulatory reform is needed as identified in the report are competitiveness/”loosen capital controls”, reform the regulatory process, enforcement and shareholder rights.

IMA is performing a more careful analysis of the report and its implications for American businesses as well as management accountants. IMA’s position as noted in press releases, the global assessment guidance discussion paper submitted to the SEC on September 15, 2006 about internal controls over financial reporting and the research study performed about Sarbanes-Oxley (Section 404) implementation, strongly supports the need for risk-based, scalable management guidance that improve the cost-benefit relationship.