The Securities and Exchange Commission today proposed to provide relief for smaller reporting companies from a part of the Sarbanes-Oxley Act that requires firms to obtain an outside audit to asses their internal control over financial reporting. Under the proposal, firms with less than $100 million in revenue would be exempt from this requirement.
The proposal would not make changes to the law’s requirements for an independent audit committee, or for companies to establish, maintain and assess the effectiveness of their internal controls. SEC Chairman Jay Clayton noted that the proposal is aimed at reducing audit costs for small firms. “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,” he said.
Banks remain subject to FDICIA’s external audit requirements, however, which apply to institutions with more than $1 billion in assets. Accordingly, banks that may be exempt from the requirement under the SEC proposal could still have an obligation to conduct an external audit. Comments on the SEC proposal are due 60 days after publication in the Federal Register.