There is a ray of hope on the horizon for small and midsize businesses when it comes to the onerous cost of compliance with the Sarbanes-Oxley Act, also known as SOX.
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A Securities and Exchange Commission (SEC) advisory panel is set to approve new rules that would fully or partially exempt certain businesses from the internal control provisions of SOX. These are the provisions that require companies to inspect financial reporting procedures and fix problems that could lead to errors—or outright fraud—in their financial statements.
If the new rules are adopted by the full SEC, then hundreds of public companies with market capitalizations in the $75 million to $787 million range would fall within the exemption, reports San Francisco research firm Glass, Lewis and Co.
In my last column, I outlined the high and rising cost of federal compliance (totaling more than $1 trillion) incurred by businesses of all sizes. The new SOX rules would be a welcome step toward reducing some of these costs.
This would eliminate some sales opportunities for the channel when it comes to helping SMBs meet federal compliance rules. But it also would serve to free up funds that might otherwise be tangled up in compliance efforts. Businesses, instead, could apply these funds to a broader range of technology spending.
Even if the SEC advisory panel votes to approve the proposed exemption, its actual implementation faces a big hurdle, as passage by the full SEC is uncertain. But at least the SEC is beginning to consider how SOX, passed in 2002 in the wake of corporate scandals such as the Enron debacle, has become a costly and onerous mandate for smaller companies.
What do you think about these new SOX rules? Let me know via e-mail at firstname.lastname@example.org