Final rules posted for SOX 404(b) extension

By Cydney Posner

The SEC has posted its final rules extending by one year the date for compliance with the auditor attestation requirements of SOX 404(b) for non-accelerated filers. The extension is intended to allow time for the SEC and PCAOB to take planned additional actions with respect to implementation of the SOX 404 requirements, as well as to address concerns expressed (including by Senators Kerry and Snowe) regarding the cost of implementation for smaller companies. Among these contemplated actions are the issuance by the PCAOB of final staff guidance on auditing internal control over financial reporting (ICFR) for smaller public companies and conduct of the SEC's study (which will include a web-based survey of companies subject to SOX 404) to determine whether AS 5 and the SEC's new management guidance on evaluating ICFR are helping to make the ICFR evaluations and audits more cost-effective for smaller reporting companies.

Under the extension, non-accelerated filers will not be required to provide auditor attestation reports until their annual reports for fiscal years ending on or after December 15, 2009. They will, however, still be required to provide the SOX 404(a) management assessment of the effectiveness of the company's ICFR, which will be required to state that the company’s annual report does not include an auditor attestation report. Until non-accelerated filers are required to comply with both SOX 404(a) and 404(b), the management report will continue to be treated as "furnished" rather than "filed" and will not be subject to liability under Section 18. (Of course 10b-5 still applies.)

The revised compliance dates for the SOX 404 ICFR requirements are presented below:

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