Sarbanes-Oxley Exemption for Small Businesses
On Wednesday November 4th, the House Financial Services Committee approved legislation that would permanently exempt some small businesses from having to comply with provisions of the Sarbanes-Oxley Act. The amendment would exempt companies with a market cap of less than $75 million from having to comply with financial reporting provisions of the 2002 Act, Section 404. That language was backed by the White House.
The amendment, approved by a 37-32 vote, was sponsored by Democrat John Adler and Republican Scott Garrett, and voted for by nine other committee Democrats.
According to the Center for Investors and Entrepreneurs at the Competitive Enterprise Institute, this measure will simplify audit requirements for small businesses, and free the resources of these innovative firms for the creation of new products, new technologies, and new jobs rather than accounting minutiae. The Center points to new research from economist Kenneth Lehn of the University of Pittsburgh showing that auditing costs reduce firms’ research and development spending and business investment, two important precursors for job growth.