This column is the second in a new series designed to keep our members updated on all things Sarbanes-Oxley. Due to the extreme significance and pervasiveness of the Act's provisions, keeping abreast of the recent and impending developments that stem from the original promulgation can be a daunting task. Nonetheless, the far-reaching nature of SOX means that the importance of these unfolding events shouldn't be underestimated. Thus, we hope this column serves to help readers remain informed about prominent issues and major developments related to the Sarbanes-Oxley Act.
SEC gives compliance extension to smaller and foreign companies
On March 2, the U.S. Securities and Exchange Commission issued a release providing a one-year extension of the SOX Section 404 compliance dates for non-accelerated filers and foreign private issuers. Under Section 404 of the Act, public companies must include in their annual reports a report by management regarding the company's internal controls over financial reporting, coupled with an attestation report by an independent auditor covering management's assessment of those controls.
Non-accelerated filers are those companies that aren't required to file annual and quarterly reports with the SEC on an accelerated basis. Generally, this category applies to companies with a public float of $75 million or less and that don't meet the other requisites for consideration as an accelerated filer. Foreign private issuers are companies incorporated outside of the United States that have less than half of their ownership, assets, and/or management located in the United States. Companies should reassess their filing status to ensure eligibility for the new extension.
Companies that fall into these categories now have until the first fiscal year ending on or after July 15, 2006 to comply with the internal control over financial reporting requirements. However, the SEC has specified that this extension shouldn't be viewed as a reason to slow or delay efforts to comply with section 404. Rather, the extension was intended to allow smaller and foreign companies the additional time necessary to fully and effectively implement the new internal control provisions. Additionally, CEOs and CFOs of companies that qualify for the extension must still execute and file certifications about their internal controls as required by Section 302 of the Act.