But smaller companies should be granted some relief, according to the report. For example, the committee would exempt microcap businesses—those with annual revenues less than $10 million—from most Section 404 requirements. And small-cap companies (under $250 million in annual revenues) could sidestep independent audits of internal controls tests.

Nelson likes the idea of setting up 404 compliance alternatives for smaller companies. But such changes, he contends, must go hand-in-hand with the proposals concerning PCAOB that are outlined in the report: if Sarbox 404 exemptions are approved, then the PCAOB would be required to develop new audit standards specifically for smaller public companies.

Those new standards should provide guidance for auditors on their clients' design and implementation of internal controls, according to the report. But the PCAOB shouldn't mandate a quarterly audit of controls testing, the authors contend.

In the meantime, more than 98 percent of public companies are "striving hard to provide accurate information, yet we are spending time on non-value-added items to comply" with Sarbox, according to Gallagher. And such efforts lead to a waste of shareholders' money, the finance chief thinks.

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