On Wednesday, July 21, 2010,  the Dodd-Frank Act took effect which, among other measures, exempts smaller reporting companies from the Sarbanes-Oxley (SOX) requirement under Section 404(b) for an auditor report on management’s assessment of internal controls over financial reporting.  Under the new law. exempt companies are those that are  “non-accelerated filers” which are defined by the SEC as company with non-affiliated market capitalization under 75 million or more, measured at the end of the previous year’s second quarter.

Final Stage of Section 404 of Sarbanes-Oxley to begin in June 2010 requiring small public companies to provide audited assessment of internal controls over financial reporting

The SEC announced the final stage of Section 404 of the Sarbanes-Oxley Act of 2002 (SOX Act) which will require the smallest publicly traded companies to comply with the SOX Act by June 2010. Small public companies, those with a public float below $75 million, must begin providing audited assessments of their internal controls over financial reporting beginning with their annual reports for fiscal years ending on or after June 15, 2010.

Section 404(b) of the SOX Act requires the company’s audit firm to issue an opinion on the effectiveness of the company’s internal control over financial reporting (SOX Opinion).  In order to issue a SOX Opinion, the audit firm must perform an audit of the company’s internal control over financial reporting in accordance with the standards established for attestation engagements

“Since 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,” said SEC Chairman Mary L. Schapiro.

The SEC press release is available at: http://www.sec.gov/news/press/2009/2009-213.htm

GBH CPAs, PC has provided a brief summary of what this final SOX Act change means for small public companies. http://www.secfile.net/docs/gbh082009.pdf