 |
 |
|
|
|
||||||||||
|
||||||||||
|
|
|||||||||
|
||||||||||
Next month's SEC roundtable on Sarbox's internal control provisions could be dominated by gripes from small caps.
Marie Leone, CFO.com | US
April 5, 2006
At the risk of being in the minority on this issue, it seems to me that while much has been mentioned about the cost of 404 compliance, little has been discussed about the benefits of compliance. Having first-hand experience with seeing both sides of this issue--albeit from a large caps' perspective--it seems to me that perhaps there are two solutions to this challenge. First, review methodologies employed to comply with SOX based on a risk assessment as between management and independent auditor's upfront and design controls around those areas. Alternatively, quit carping about the cost and go private. At the end of the day, it seems that access to the US capital markets has certain conditions; one of which is effective internal controls and processes to ensure sufficient controls are in place to identify/prevent potential frauds and other malfeasance. If this is too onerous for a small cap company, why should non-accredited investors have access to their stock? As I recall there have been far more instances of financial malfeasance involving small cap stocks as compared with large caps, at least pre-2000. Bottom-line: Get over it or privatize.
Posted by Rob Jennings | April 10, 2006 07:53 pm
The implementation issues experienced by the accelerated filers in year one were all avoidable -- driven largely by the extent of deferred maintenance and lack of appropriate implementation and audit guidance. Since the roundtable of 2005, additional guidance have been provided by the SEC and PCAOB, and COSO has put together a draft guidance for smaller public companies. Large public companies in year two are already experiencing a significant decline in the cost of compliance; and the market is also seeing a marked decline in the number of restatements. By exempting smaller public companies from the Sarbanes requirements, we are basically telling investors to "invest at their own risks." Effective internal control is essential for every business and investors deserve the same level of assurance from the small businesses. The issue on hand is finding the right balance and implementing the right mix of controls. With good business sense, smaller public companies can control the cost of compliance by implementing and maintaining cost-effective controls to prevent or detect frauds or errors that could have a material impact on their financial statements. No one said this is easy. Instead of wishing for an exemption, let's make this a successful implementation for the small businesses. This way, everybody wins.
Posted by Anthony Chan | April 10, 2006 11:05 am
Hot topic. Very interested in hearing the outcome. John@CPASearchGroup.com
Posted by J Whisman | April 10, 2006 10:39 am
I applaud the SEC's Advisory Committee on Smaller Public Companies in their exemption of most companies with a market cap below $100M from Sarbox entirely. This must be enacted by the SEC Commissioners. Hoptry is accurate in stating that the act is robbing investors in smaller companies of many times the profit than all the losses incurred by dishonest corporate executives. It is not just the extra cost, but also the expanded audit time that is becoming more of an encumbrance, and less of a service. Our audit fees and the time of the audit more than tripled after Sarbox. For many companies, this cost and distraction may well spell the difference between sustained profitability and insolvency. As CFO of TyMetrix, Inc., recognized as the fastest growing technology company in CT, we could absorb this, but the opportunity costs were still enormous.
Posted by John Henrie | April 08, 2006 09:21 pm
© CFO Publishing Corporation 2009. All rights reserved.