Small Biz hearing 10 AM on Sarbanes-Oxley regulations reforms

Yeah, it's a hearing on business regulations and how they impact the bottom line for small businesses. (Primarily, but not exculsively, businesses under $75 million worth.)



What is Sarbanes Oxley: http://en.wikipedia.org/wiki/Sarbanes-Oxley_Act

Why is this a problem in terms of complying with regulations: http://www.sba.gov/ADVO/sullivanoped06_0522.pdf

What has Sen. Kerry said/done about it?:
2006 Legislation filed with Sen. Snowe: http://www.itbusinessedge.com/blogs/ssg/?p=22

Statement from Sen. Kerry's office on this (2007): http://kerry.senate.gov/v3/cfm/record.cfm?id=270595

Plans for Small Biz committee going forward (Boston Globe article 2007: ) http://www.boston.com/business/globe/articles/2007/03/08/kerry_has_big_ideas_for_small_business/

Anyone know?

Votes on the senate floor delayed this.

Thank you!

I was necessarily and somewhat ironically detained. Damn. I like the wonky hearings too. My apologies.

I will not be able to see the Commerce committee hearing at all tomorrow. That is also sort ot for reasons that ironic in nature. Sigh! Such is life.

it is really complicated testimony.
I will try to summerize when it is over - though I will all the detail

Not a good day for that to happen - this really is a lot to take in all at once. I'll be studying the transcript eventually.

Sarbanes Oxley was initiated in the wake of the collapse of companies like Enron and Global Crossing. Large companies have had to file detailed reports that have made them more transparent than companies in other countries. The good side of this is that investors, if they read it, know more about the real status and risk in the companies they buy. The bad side is that it has been far more costly than expected.

The implementation of Sarbanes Oxley for small businesses had been delayed to find ways to stream line the process. The concern was that cost per $ of revenue for a small company to have the internal audits done is far greater for small businesses than it was for bigger companies. Cox, the SEC Chairman spoke about how the costs of complying with Sarbanes Oxley far exceeded their expectations that were originally based on how costly 2 other control precesses were (Banking regulations (FDIC) and Foreign Corrupt Practice Control (name?). Although the implementation has been delayed, Cox said that in concept it is not a mistake. The point seemed to be that there was a need to minimize the likelihood of there being risks that can hurt the company - which the company knows of - that are not disclosed. The period for comments on Sarbanes Oxley for small business ended February 25.

Some of the views were:
- That it was important if you access the capital market (by going public), there is a level of transparency.
- The view that auditors should have flexibility to use professional judgment
- The process is that the management in a company will define controls, auditors will say the controls are ok - based on standards
- There were questions on whether Sarbanes Oxley was causing people or companies to relocate overseas to avoid it. The answer was that that was being taken in to consideration.

They also spoke of how hard implementing this will be. They spoke of how they have now specified a framework, but that needs to be tested. When it is tested, faults will likely be found and will need fixes. They mentioned because the reports are based on quarters, each of these tests will take a quarter - so it may take time to get a process that is good.

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I missed parts due to phone calls and other necessary interruptions, not to mention it was easy to space out during some of the questions. What I got out of it is:

- They are trying to avoid the experience the large businesses had, where the impact and costs to businesses were far more cumbersome than expected.

- Because the framework/process is not out or tested, most comments were vague. The trade off is between not overwhelming business with make work paperwork vs a need for transparency to avoid fraud as occurred in Enron.

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