Massachusetts Representative Barney Frank – the chair of the House Financial Services Committee – says that he expects a rule exempting small and medium businesses from costly audits to survive negotiations between the House and Senate. The rule was mandated in the Sarbanes-Oxley Act.
“I believe the votes are there whether I like it or not,” Frank was quotes as saying, according to Dow Jones Newswires.
The Sarbanes-Oxley Act was introduced in 2002 – soon after the financial world was rocked by the Enron scandal – to increase accountability and help prevent corporate accounting fraud.
The amendment in the financial reform bill, which Frank tried and failed to eliminate, would permanently exempt companies with market capitalizations under $75 million – roughly half of all public companies – from audit compliance. The exemption was not contained in the Senate version of the bill.
Small business leaders have long complained that the regulations are an unfair burden on smaller companies and hinder new business formation. Lord and Benoit, a SOX consulting firm, says that the average cost of the audits for a smaller public company is about $78,000.