WASHINGTON -- Proposed revisions to a landmark 2002 anti-fraud law will include relaxing some rules for small public companies in a bid to curb what they say have been excessive costs related to audits, the Securities and Exchange Commission's accounting chief said yesterday.
SEC chief accountant Conrad Hewitt said regulators are trying to balance the costs and benefits of the Sarbanes-Oxley law's Section 404, which requires companies to file reports on internal financial controls and to fix any problems. Smaller firms especially have complained about the costs of complying with the requirements.
Reducing testing and documentation for businesses between $75 million and $700 million in market capitalization is in the works, and creating a minimum revenue requirement for companies is also a possibility, Hewitt said following his speech at an American Institute of Certified Public Accountants conference.
The SEC is in daily communication with the independent board that oversees the U S accounting industry as both bodies work on revisions , he said.
"The proposal will be designed to focus auditors on areas that pose higher risk of fraud or material error in order to achieve cost savings," Mark W. Olson, chairman of the Public Company Accounting Oversight Board, said in remarks at the conference.
Representative Michael Oxley, an Ohio Republican who is the outgoing chairman of the House Financial Services Committee, acknowledged that Section 404 was more expensive for companies than expected, but said compliance costs were declining over time and blamed the costs issues on "overzealous implementation."
The SEC is scheduled to tentatively adopt its revisions tomorrow and the PCAOB is set to hold its public meeting Dec. 19 to vote on auditing standard changes.