SEC Tosses Small Business a Bone on SOX

The Securities and Exchange Commission did not exempt small business owners from internal control provisions of Sarbanes-Oxley. However, the SEC did say that auditors of small companies were only required to audit internal controls which might have a material impact on financials. The measure was designed to prevent overauditing by firms worried about legal liability to third parties and which runs up audit cost.

In the short run, the SEC decision appears to be a reasonable compromise between small firms wanting relief from SOX compliance costs and users of financials wanting high-quality information from smaller businesses. However, a review and some tweaking may be needed in the future.