In its 2006 report, the SEC's small-company advisory committee noted that auditors of smaller firms believe "the smaller the company, the less valuable the internal control audit is to the financial statement audit." With larger companies, the auditors need to rely more on internal controls, since it's impractical to test a large number of transactions for complex operations that are in multiple locations.

Not surprisingly, the consultancies and accounting firms that stand to gain from new business are deflecting the notion that 404(b) compliance is an unnecessary "burden" for small business. Critics of the reform legislation insist that the process gets easier over time, and say smaller businesses are especially in need of the scrutiny since they are inherently more risky, with fewer finance staffers in place to provide proper checks and balances. "If they're going public, they should be following the same rules as everyone else," says Guy Clarke, a consultant at accounting firm Sensiba San Filippo.

Still, these critics do see both sides and acknowledge there's not an easy answer, particularly when a lot of small businesses have been struggling in the past 18 months. "It's an interesting debate, whether you should exempt smaller companies from having their internal controls audited just because it's expensive," says Berkenblit.

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