Small Public Companies To Begin Providing Audited Assessments

On October 2, 2009, the Securities and Exchange Commission (SEC) issued a Press Release announcing the extension of the compliance date for Section 404(b) of the Sarbanes-Oxley Act until years ending on or after June 15, 2010 for those public companies who have “non-accelerated filer” status. The expiration date had previously been for fiscal years ending on or after Dec. 15, 2009. However, the SEC granted the extension so that the SEC’s Office of Economic Analysis could complete a study of whether additional guidance provided to company managers and auditors in 2007 was effective in reducing the costs of compliance. When the study was published less than three months before the December 15 deadline, the SEC determined that additional time was appropriate and reasonable so that small public companies and their auditors can better plan for the required auditor attestation.

Now, the June 15^th date is approaching. On that date, small public companies ($75 million or less in public float) will be required to report the effectiveness of their internal controls over financial reporting. They will be required to file an independent auditor attestation of the effectiveness of internal controls, which include privacy, data security, and data breach controls.

Previously, Section 404(b) only applied to larger companies with more than $75 million in public float. All public companies already comply with 404(a), the provision that requires management to review and report on the state of its internal controls over financial reporting.

Terms To Know

Non-accelerated filer: An issuer that does not meet the requirements of an accelerated or large accelerated issuer.

Accelerated filer: An issuer after it first meets the following conditions as of the end of its fiscal year:

• The issuer had an aggregate worldwide market value of the voting and non-voting common equity held by its non-affiliates of $75 million or more, but less than $700 million, as of the last business day of the issuer's most recently completed second fiscal quarter;
• The issuer has been subject to the Exchange Act reporting requirements for a period of at least twelve months;

• The issuer has filed at least one annual report; and
• The issuer is not eligible to use the requirements for smaller reporting companies for its annual and

quarterly reports.

Large accelerated filer: An issuer after it first meets the following conditions as of the end of its fiscal year:

• The issuer had an aggregate worldwide market value of the voting and non-voting common equity held by its non-affiliates of $700 million or more, as of the last business day of the issuer's most recently completed second fiscal quarter;

The issuer has been subject to Exchange Act reporting

requirements for a period of at least twelve calendar months;

• The issuer has filed at least one annual report; and
• The issuer is not eligible to use the requirements for smaller reporting companies for its annual and quarterly reports.

Public Debt Filers: Registrants who do not have registered public equity but have registered public debt are, by definition, non-accelerated filers as they do not meet the criteria of an accelerated or large accelerated filer.

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