Gear up for more fighting on SOX 404: An amendment to Senate financial reform bill would exempt companies with less than $150 million in public float from Sarbanes-Oxley’s outside auditor attestation requirement, which would include some companies already complying with the provision.

Sen. Kay Bailey Hutchison (R-Texas) and Sen. Mary Landrieu (D-La.), chair of the Committee on Small Business and Entrepreneurship, have filed an amendment to S. 3217, the “Restoring American Financial Stability Act of 2010,” that would exempt public companies with less than $150 million in public float from complying with Section 404(b).

The amendment also calls for a study to see how to reduce the compliance burden for companies with public float of $150 million to $700 million, including recommendations about whether the
exemption should be extended to larger issuers.

Exactly when the measure would come to the floor for a vote is uncertain, but Gene Diamond, a spokesman for Senator Hutchison, says it could be next week.

Section 404(b), which is widely considered the 2002 statute’s biggest compliance burden, requires public companies to get an auditor’s attestation about the effectiveness of their internal controls over financial reporting. Under current SEC rules, companies with less than $75 million in public float (non-accelerated filers) are currently exempt from the auditor attestation provision, but are slated to begin complying with 404(b) for fiscal years ending on or after June 15, 2010.

The issue is a lightning rod for controversy. Most business groups and companies support measures to reign in 404(b). However, most investor and consumer groups strongly oppose any exemption from the provision.

Filers with more than $75 million in public float have had to comply with 404(b) since 2004. All public companies already comply with 404(a), the provision that requires management to review and report on the state of their internal controls over financial reporting.

The Senate measure filed by Landrieu and Hutchison is also broader than that included in the House financial reform bill passed last December. The House bill would provide an exemption from 404(b) for companies with less than $75 million in public float and would call for a study to determine how the SEC can reduce the burden of complying with Section 404(b) for companies with market caps between $75 and $250 million.

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RELATED EVENT
For the latest information on SOX 404(b), including an intimate session on internal auditing standards led by the North American chairman of the board of the Institute of Internal Auditors, please consider joining us at Compliance Week’s 5th Annual Conference, May 24-26 at The Mayflower Hotel in Washington, D.C.