SEC Releases Long-Awaited Study on SOX

This week, the U.S. Securities and Exchange Commission (“SEC”) released its study on the impacts of section 404(b) of the Sarbanes-Oxley Act (“SOX”). The SEC concluded that section 404(b) which requires an external auditor to issue an opinion on a company’s internal control over financial reporting should remain effective for mid-sized companies with a market capitalization of $75 to $250 million. Here is a summary of their conclusion and recommendations:

The work performed by the Staff reinforces our understanding that the costs of Section 404(b) have declined since the Commission first implemented Section 404, particularly in response to the 2007 reforms, that investors generally view the auditor‘s attestation on ICFR as beneficial, and that financial reporting is more reliable when the auditor is involved with ICFR assessments.

1. Maintain existing investor protections of Section 404(b) for accelerated filers, which have been in place since 2004 for domestic issuers and 2007 for foreign private issuers.

2. Encourage activities that have potential to further improve both effectiveness and efficiency of Section 404(b) implementation.

Since the Dodd-Frank Act exempted small companies with a market capitalization less than $75 million from section 404(b), this study should effectively end the debate over Sarbanes-Oxley section 404 requirements. For mid-size companies looking to gain efficiencies in complying with section 404(b), Wheelhouse Advisors can help. Email us at to learn more.


About Wheelhouse Advisors
Wheelhouse Advisors LLC is the publisher of The ERM Current™, an online publication and blog dedicated to providing the latest updates on current trends in Enterprise Risk Management & Control. Wheelhouse Advisors provides cost-effective Enterprise Risk Management & Control solutions to both large and mid-size corporations. To learn more about Wheelhouse Advisors, please visit our web site at

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