Question

In your opinion, should smaller public companies be exempted from SOX 404(b)? please explain in detail

Answer 1

Introduction:

SOX is ligislation passed by the US to protect the shareholders and general public from accounting errors and fraudulant in forms and to improve the accuracy to corporate disclosure.

About SOX:

SOX is providing the temporary exeption from the auditors association requirement of the section 404 (b) for the low revenue issuers. According to the press release the bill would provide " very narrow fix that is temporarily extend the Sarbel's Oxeley sections that is 404 (b) exemptions for an additional five years for a small subset of EGCs with small average revenue f $ less than 50 million and less than 700 $ in public float

SOX emphasising accelerate or emerging growth of the company, to obtain an auditors attestation regarding the management's assessment of the effectiveness of the company's internal control over finance reporting. Under the bill Company lose the exception on earlier of the end of the 10 years after its IPO, last day of the fiscal when it's average annual gross revenue exceeds $ 50 million or the date when the company became a larger accelerated filer.

Conclusion:

To evaluate the effectiveness of the SOX in preventing the future frauds, one must take in to consideration the many different situations in which the legislation is applicable. Cost of implementing the SOX are high but the benefit of the increased investors confidence is higher. The regulation will be reduce the frequency but not completely control in the future activity.