Small Public Company Forum

On October 2, 2009, the SEC announced its final extension of the auditor-attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002 for smaller reporting companies. In justifying the extension, the SEC cited the need to complete its study of whether certain guidance provided in 2007 in the form of Audit Standard No. 5 was effective in reducing compliance costs.

With the new extension, smaller reporting companies with fiscal years ending on or after June 15, 2010 will be required to provide auditor-attestation reports on the effectiveness of their internal controls over financial reporting. Importantly, this extension does not impact management’s responsibility to assess and report on the effectiveness of its internal controls, or the Chief Executive Officer and Chief Financial Officer’s requirement to certify as to the effectiveness of those controls under Section 302 of the Act.

According to SEC Chairman Mary L. Schapiro, “[s]ince there will be no further Commission extensions, it is important for all public companies and their auditors to act with deliberate speed to move toward full Section 404 compliance.” A copy of the short SEC release can be viewed at: http://www.sec.gov/news/press/2009/2009-213.htm.

Over the course of the next six months, companies will be best served by continuing to work with their internal auditors to improve processes and controls, remediate previously identified control deficiencies to reduce adverse findings, and prepare for the forthcoming auditor’s attestation.

Submitted by Abigail Grenfell, President of Internal Control & Anti-Fraud Experts, LLC; and Rachel Polson, Audit Partner at Baker Tilly International.