AICPA RSS
x
Username

Password

Remember Me Register | Forgot Username? | Password?


Home Advocacy Federal Issues Section 404(b) of Sarbanes-Oxley Act of 2002

Federal Issues

Section 404(b) of Sarbanes-Oxley Act of 2002 

The Sarbanes-Oxley Act requires that the management of public companies assess the effectiveness of the internal control of issuers for financial reporting.  Section 404(b) requires a publicly-held company’s auditor to attest to, and report on, management’s assessment of its internal controls. 

The AICPA has consistently urged implementation of Section 404(b) for all publicly held companies.  Section 404(b) has led to improved financial reporting and greater transparency.  The AICPA believes that all investors in public companies should have equal benefit of the same protections.  Some small companies have argued that the regulatory cost and burden of having the assessment outweighs the benefit to investors.

During consideration of the bills that became the Dodd-Frank Wall Street Reform and Consumer Protection Act, there were several amendments offered that would have exempted a large number of public companies from section 404(b).  Ultimately, there was an exemption enacted for non-accelerated filers (companies with less than $75 million in public float).  These smaller issuers were never required by the SEC to comply with section 404(b) since enactment of Sarbanes-Oxley Act.

There were also 2 studies required by Dodd-Frank.   The first required the SEC to conduct a study on the burden caused by section 404(b) compliance for companies with a market capitalization between $75 million and $250 million.  The SEC study recommended maintaining existing investor protections of Section 404(b) for companies with market capitalization above $75 million and encouraged activities that have potential to further improve both the effectiveness and efficiency of Section 404(b) implementation.

Dodd-Frank also required the GAO to conduct a study to evaluate whether exempt issuers have fewer or more restatements, and how their cost of capital compares with issuers subject to section 404(b).  The study is due by July 2013.

Legislative Proposals

112th Congress

Since January 2011 when the 112th Congress convened, there have been continuing attempts to increase the exemption level for companies subject to section 404(b).  A number of bills have been introduced that would expand the Dodd-Frank exemption.  The exemption levels in these bills range up to all companies with a market capitalization of up to $1 billion.

In April 2012, The Jumpstart our Business Startups Act (JOBS Act) was signed into law.  It would generally exempt a new public company from compliance with section 404(b) for the first 5 years it is a public company as long as it does not exceed certain market capitalization or revenue thresholds (called an Emerging Growth Company, or EGC). This Act extends an existing two-year regulatory delay in the implementation of section 404(b) for companies who have had an initial public offering. Importantly, it does not contain an exemption. The Act also contains two provisions urged by the AICPA.  The first allows an EGC to opt-out from being treated as an EGC.  The second makes it clear that existing public companies cannot take advantage of the EGC exemptions even if they otherwise meet the criteria (not exceeding the market capitalization or revenue thresholds and less than 5 years since the IPO). Additional information on these issues is contained in the AICPA’s March 19, 2012, letter to the Senate. The bill was passed by both the House and Senate on large bipartisan votes and was signed by the President on April 5, 2012. It was originally introduced by Congressman Fincher (R-TN), and Congressman John Carney (D-DE)  with the title, “Reopening American Capital Markets to Emerging Growth Companies Act of 2011,” H.R. 3606.

Other bills with various expanded exemptions have also been introduced in the House and Senate during this Congress.  Congressman Ed Royce, a California Republican, offered an amendment during House Financial Services Committee consideration of the JOBS Act that would have exempted all public companies with a public float of less than $1 billion from the 404(b) requirements.  He withdrew the amendment when promised that his proposal would be considered separately by the Committee later this year. The AICPA continues to fight all such efforts to reduce existing investor protections.

Resources

Copy of Legislation

A copy of the JOBS Act, and all major Congressional actions leading to passage, is available on the Library of Congress's THOMAS website by searching by its bill number, H.R. 3606.  The Dodd-Frank Act is available by using the advanced search function and searching for H.R. 4173 by bill number under the 111th Congress.

AICPA Letters

March 19, 2012 Letter to the United States Senate

October 4, 2011 Letter to Chairmen Bachus and Garrett and Ranking Members Frank and Waters regarding October 5, 2011 Subcommittee on Capital Markets Mark Up of 404(b) Legislation 

May 5, 2010 Email to the Senate Opposing the Hutchison Amendment

May 5, 2010 Email to the Senate Opposing the Vitter Amendment

March 22, 2010 letter from AICPA President Barry Melancon to Senate Banking Committee Opposing Potential Amendments to Sarbanes-Oxley Section 404(b) (This letter was sent on April 21, 2010 to the entire Senate.)

December 9, 2009 letter from AICPA President Barry Melancon to the House of Representatives supporting the Kanjorski amendment

Other Legislative Letters

March 22, 2012 Center for Audit Quality/Council of Institutional Investors Letter to Senate regarding JOBS Act

March 13, 2012 Letter from SEC Chairman Mary Schapiro to Senate Banking Chairman Tim Johnson and Ranking Member Richard Shelby regarding JOBS Act

November 29, 2011Center for Audit Quality/Council of Institutional Investors Letter to Chairman Bachus and Ranking Member Frank regarding Sarbanes-Oxley 404(b) Legislation 

September 20, 2011 Center for Audit Quality/Council of Institutional Investors/CFA Institute Letter to Chairmen Bachus and Garrett and Ranking Members Frank and Waters regarding Sarbanes-Oxley 404(b) Legislation 

June 15, 2010 Center for Audit Quality/Council of Institutional Investors/CFA Institute Letter to House and Senate Conferees Opposing a Section 404(b) Exemption

May 20, 2010 Center for Audit Quality/Council of Institutional Investors Letter Opposing the Hutchison and Vitter Amendments in the Senate to exempt smaller companies from Sarbanes-Oxley Act Section 404(b)

April 22, 2010 Center for Audit Quality Letter to the Senate Opposing Potential Amendments to exempt smaller companies from Sarbanes-Oxley Act Section 404(b)

December 8, 2009 Center for Audit Quality Letter to House Members Commending Them for Their Continued Support of SOX Section 404(b)

December 2, 2009 Center for Audit Quality Urges Senate Banking Committee Leadership Not to Weaken Sarbanes-Oxley

October 26, 2009 Center for Audit Quality Expresses Support for SOX Section 404(b) in Letter to Lawmakers

Staff Contact

Peter M. Kravitz
Director-Congressional and Political Affairs
202-434-9218
pkravitz@aicpa.org 

 

Open Hide documents in this section

Page  1 2 3 4 5 >> 
Showing results 1 - 15 of 94
Order by:


AICPA Letter to House Financial Services Committee Supporting H.R. 1564.

Legislative Letters:  The AICPA supported a bill approved on June 19, 2013 by the House Financial Services Committee that would prevent the PCAOB from imposing mandatory audit firm rotation for public companies.
Published on June 19, 2013

ERISA Fiduciary Definition - Appraisers of Employee Stock Ownership Plans

Article:  The AICPA believes that CPAs who perform valuation services for employee stock ownership plans (ESOPs) should not be defined as fiduciaries under the Employee Retirement Income Security Act (ERISA). Rather, the AICPA believes that the U.S. Department of Labor (DOL) should implement rules that would require appraisers of ESOPs to
Published on June 18, 2013

XBRL

Article:  Extensible Business Reporting Language (XBRL) used in financial and other reporting allows for easier access to more transparent information.  AICPA supports legislative proposals to utilize XBRL by companies, Federal agencies and recipients of Federal funds.
Published on June 17, 2013

Audits of FHA-Approved Participants and Related HUD Requirements

Article:  FHA proposes new rule to strengthen risk management and shift accountability for the underwriting of FHA-insured loans to the mortgage banks. It may no longer require FHA to approve loan correspondents (mortgage brokers) participating in the FHA program and HUD would no longer require FHA to submit audited financial statements or audits
Published on May 14, 2013

Municipal Advisors

Article:  The AICPA generally supports the SEC’s proposed rules as a means to strengthen investor protections in the municipal securities market.  The AICPA is concerned, however, because the proposed rule would require that accountants performing customary and usual accounting services would be required to register as municipal advisors.
Published on May 01, 2013

Congressional and Political Affairs Advocacy

Overview:  The AICPA monitors and advocates on legislative and other matters that affect the accounting profession. Working with state CPA societies and other professional organizations, the AICPA provides information to and educates federal, state and local policymakers regarding key issues.
Published on May 01, 2013

Convergence of International and US Accounting Principles and IFRS

Article:  International Financial Reporting Standards (IFRS) set by the International Accounting Standards Board (IASB) in London is a response to worldwide demand from regulators, investors, businesses, and auditing firms for a single set of high-quality, globally-accepted accounting standards.
Published on April 03, 2013

Tax Legislation and Policy

Article:  The Congressional and Political Affairs Team often assists the Tax Team with tax legislation and policy issues, and advocates about them to Members of Congress and other key policymakers on behalf of the profession.
Published on April 03, 2013

Section 404(b) of Sarbanes-Oxley Act of 2002

Article:  The Sarbanes Oxley Act requires that the management of public companies assess the effectiveness of the internal control of issuers for financial reporting.  Section 404(b) requires a publicly-held company’s auditor to attest to, and report on, management’s assessment of its internal controls. AICPA believes that all investors in public companies
Published on April 03, 2013

GAO Study of Financial Planning

Federal Law:  Dodd-Frank required the GAO to conduct a study on the effectiveness of existing regulation of financial planners, including tax advisors.  The AICPA met with the GAO during the study to present the profession’s point of view.  AICPA strongly opposed any new regulatory structure affecting CPAs as they are already comprehensively
Published on April 03, 2013

Financial Literacy and Education

Article:  Learn about the AICPA's award winning financial literacy programs.
Published on April 03, 2013

FASB Independence and Fair Value Accounting

Article:  The AICPA strongly and unequivocally supports independence of the U.S. and international accounting standard setting bodies, the Financial Accounting Standards Board (FASB) in Norwalk, Connecticut, and the International Accounting Standards Board (IASB) in London.
Published on April 03, 2013

Extraterritorial Private Rights of Action, also known as F-Cubed Litigation

Article:  The accounting profession believes private litigants may utilize U.S. securities laws within the territorial jurisdiction of the U.S. and that the United States Supreme Court decision in Morrison v. National Australia Bank, Ltd. is the correct reading of the Securities Exchange Act of 1934.
Published on April 03, 2013

Consumer Financial Protection Bureau

Article:  This article outlines the AICPA's involvement with the development of the Consumer Financial Protection Bureau (CFPB). The AICPA was successful in winning recognition by House and Senate lawmakers of the vital role CPAs play in advising Americans on their financial decisions, thus preventing CPAs from reporting to a new regulatory body.
Published on April 03, 2013

Federal Legislative and Regulatory Issues

Federal Law:  This page highlights the advocacy issues in which the Congressional & Political Affairs Team is advocating on behalf of the profession, and also those issues that the team has recently followed.
Published on March 29, 2013

Page  1 2 3 4 5 >> 
Showing results 1 – 15 of 94
Show Results per page
Copyright © 2006-2013 American Institute of CPAs.