SEC Proposes Changes to Ease Small Company Internal Audit Requirements
Smaller reporting firms may see some relief soon after the SEC proposed changes recently that would reduce the number of companies required to complete an outside audit of their internal controls over financial reporting, that are currently a part of the Sarbanes-Oxley Act of 2002 (SOX). The proposed changes would not require companies with less than $100 million in revenue to obtain an attestation of their internal controls over financial reporting, from their independent outside auditor.
Other key SOX provisions would remain intact, including the need to establish an and maintain an independent audit committee along with the specified requirements, CEO and CFO certifications of the financial reports and the continuation of companies establishing, maintaining and assessing their effectiveness of internal controls.
“The proposed rules build on the JOBS Act of 2012 and are aimed at a subset of smaller companies where the additional requirement of an IFCR auditor attestation may not be an efficient way of benefiting and protecting investors,” said SEC Chairman Jay Clayton. “Investors in these lower-revenue companies will benefit from more tailored control requirements. Many of these smaller companies – including biotech and health care companies – will be able to redirect the savings into growing their companies by investing in research and human capital.”
In another move last year, to update company classification definitions, the SEC revised the definition of a smaller reporting company, which expanded the number of companies eligible for compliance requirement relief.
The public will have 60 days to comment on the current proposal once filed.
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