Risk & Compliance

SEC May Delay 404 for Foreign Companies

The commission's chief accountant says he's "sensitive" to Sarbox compliance woes of overseas issuers here.
Stephen TaubDecember 9, 2004

Foreign companies that trade on U.S. exchanges may be the next group of companies to receive a short reprieve from meeting the requirements of Section 404 of the Sarbanes-Oxley Act.

Securities and Exchange Commission Chief Accountant Donald Nicolaisen said in a speech this week that he is “sensitive” to the burdens that group of companies is facing as they gear up to meet their July deadline for assessing and attesting to their internal controls over financial reporting. Last week the SEC delayed implementation of Section 404 for certain small companies.

Speaking to attendees of the national conference American Institute of Certified Public Accountants (AICPA), Nicolaisen noted that, “Clearly many non-U.S. issuers and their auditors are working hard, and are well on their way to completing the work necessary to report on internal controls. However, I am sensitive that this requires, in some cases, great cultural change.”

Meanwhile, Nicolaisen said he would schedule several public meetings in the spring — and over the next few years — to discuss concerns related to Section 404 compliance.

The complaints and tales of frustration from inside companies are mounting. Most often, corporate executives grumble about long man-hours and huge amounts of money being shelled out to meet Sarbox regulatory requirements and new-stock exchange rules.

For example, in a local survey conducted by KPMG, 77 business leaders in Arizona were polled about the impact of regulation on their businesses. Fifty-two percent said recent regulations have had a negative effect on their companies, and 56 reported that the costs of complying have exceeded their estimates, according to the Arizona Republic.

Compliance difficulties have already delayed implementation of Section 404 either three or four times, depending upon the size of the company and when its fiscal year ends.”The costs are real, but the benefits in the long term are enormous,” SEC Commissioner Harvey Goldschmid told attendees of the same AICPA conference.

“It’s an assurance for everybody that will in the end very much benefit the economy.”