On the heels of a study that points out the imbalance in proportionate costs for small companies to comply with SOX, Accounting Today reports that The House Financial Services Committee voted that small and midsized public companies should be exempt from Sarbanes-Oxley audit requirements.

The result is a pending bill (Investor Protection Act) that will continue making its way through the legislative process.  But if it does progress it will be a game-changer for companies with market caps under $75 million, as the cost of audits has proven significant enough to alter companies’ strategy and perhaps even hold them back from peak performance. CFO magazine highlights the relief of small companies everywhere in this recent story, in which they note that:

Many financial executives say an exemption would mean the same level of integrity in their financials but with less cost. “We have a fairly good system of internal controls, and we’d like to keep that for our own well-being as much as anything else,” says Marty Schwenner, CFO of digital-power and motion-control systems manufacturer Magnetek, a company whose market cap dropped it from the accelerated filer range to the nonaccelerated filer range this year. “We view internal control as something that’s our responsibility whether or not Congress tells us it’s something that is.”

Mr. Schwenner took the words right out of my mouth, and I applaud his sense of obligation.  Internal controls will always be a crucial piece of the business that streamlines financials and paves the way for airtight fraud prevention, regardless of audit requirements.  We encourage non-accelerated filers to enjoy the potential relief of the exemption, but to remain vigilant when it comes to maintaining and monitoring their financial controls.

This entry was posted on Monday, November 23rd, 2009 at 9:06 pm and is filed under Fraud Prevention, Sarbanes Oxley. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.