SOX too costly

The cost for public companies to comply with Sarbanes-Oxley is higher than expected, according to a recent Government Accountability Office report.The report, released by republican Senators Olympia Snowe and Michael Enzi, indicates that companies are choosing to go private in order to sidestep the rules. In order to address the concerns an official advisory committee has recommended that small companies be awarded exemptions from SOX. However, this could hinder progress the act has gained in regards to anti-fraud protection of publicly held companies.The report indicates that it is however integral to decrease the financial damage SOX has on small companies.Recently, Securities and Exchange Commission appointed advisory committee suggested smaller companies be exempt from the SOX requirement to file reports on internal financial control status. This exemption would be relevant to about 70% of all public US-based companies.Snowe, head of the senate’s small business committee, warns however that complicated regulations may “place small businesses in a paralyzing state of regulatory limbo and damage their ability to create jobs.” Alternatively, Snowe suggests the SEC develop rules specific to small businesses. SEC chairman Christopher Cox however feels the regulations should represent internal-controls requirement applicable to all companies. Legislation is currently being drafted to exempt companies with market value under US$700 million from complying with SOX.