FOR IMMEDIATE RELEASE
ICBA Tells Congress New SOX 404 Guidance Won’t Significantly Reduce Audit Costs for Small Businesses
PCAOB Should Set Quantitative Benchmark
Washington, D.C. (June 5, 2007)—The Independent Community Bankers of America (ICBA) told Congress today that although new SEC Guidance for management under Sec. 404 of the Sarbanes Oxley Act of 2002 and the new Accounting Standard No. 5 issued by the Public Company Accounting Oversight Board (PCAOB) may curtail excessive testing of controls and reduce some unnecessary documentation required by SOX 404 audits, the new guidance and standard are unlikely to significantly reduce 404 audit costs for community banks and other smaller public companies.
"Since the new accounting standard and the guidance have not been field tested," ICBA said in a written statement to the House Small Business Committee, "there is no evidence to suggest that, despite the proposed standard's focus on scalability and risk-based testing, auditors will significantly change their audit procedures or reduce the time they take to perform a 404 audit. Even with a revised auditing standard, we believe that smaller public companies would still be subject to unnecessarily extensive auditing by auditors unduly concerned about their liability and being second guessed by the PCAOB." In order to reduce overall SOX 404 costs, ICBA suggested the PCAOB set a quantitative benchmark tied to a reduction in overall SOX 404 audit costs.
ICBA expressed disappointment that the SEC did not adopt ICBA's recommendation to delay by one year the Sec. 404 due dates for non-accelerated filers so calendar year filers would have until the due date for their 2008 annual report to file management internal control reports. The one-year delay would have allowed the SEC and the PCAOB to evaluate the cost effectiveness of the internal control audits under the new standard on accelerated filers and would have given non-accelerated filers that have no experience with Sec. 404 additional time to understand and apply the new guidance and establish a new internal control framework.
"While a risk-based and scalable standard may reduce some of the high costs of SOX Sec. 404, community banks and other smaller public companies should be partially or fully exempted from Sec. 404 in order to avoid unnecessary costs and to be competitive with larger companies and foreign competition," ICBA said.
Read the full statement at icba.org.