The Wall Street Journal-20080202-The Buzz- SEC Grants Small Firms Reprieve From Audit Rule

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The Buzz: SEC Grants Small Firms Reprieve From Audit Rule

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WASHINGTON -- Small public companies will get an additional year to bring added scrutiny to financial-reporting controls set by Congress in 2002, under a proposal announced Friday by the Securities and Exchange Commission.

The SEC, which has repeatedly postponed the requirement for smaller firms, said it voted 4-0 on Thursday for a one-year extension and will seek comment on it for 30 days. The delay means the smallest U.S. public companies would not have to comply with the internal-controls audit requirement until fiscal years ending on or after Dec. 15, 2009, which the SEC said will give it time to collect and analyze "real world" compliance costs associated with such audits.

Smaller firms won't get a break on a related requirement to have corporate managers review internal financial-reporting controls, however.

Congress ordered closer scrutiny as part of the 2002 Sarbanes-Oxley Act, calling for corporate managers to make an annual assessment of their internal controls over financial reports, subject to further review by their outside auditor.

Larger companies already subject to the requirements have complained about the costs, and smaller firms have raised concerns that the regulatory burden could be crushing. The oversight board for accountants has since modified its standards for internal-controls reviews, and the SEC issued guidance intended to help managers conduct reviews.