Wednesday, April 18, 2007
Excerpts from Testimony Concerning Reporting on the Internal Controls of Small Businesses Under 404 of the Sarbanes-Oxley Act of 2002 by Chairman Christopher Cox Before the Committee on Small Business & Entrepreneurship, United States Senate April 18, 2007:
The focus of this hearing is on the proper implementation of section 404. Focusing on the implementation of 404, rather than changing the law, is consistent with the SEC's view that the problems we've seen with 404 to date can be remedied without amending the Sarbanes-Oxley Act. And despite the unduly high costs of implementing section 404 of the Act, I believe that the Act overall - including section 404 - may be fairly credited with correcting the most serious problems that beset our securities markets just a few years ago, and with restoring investor confidence in our markets.
The Commission is determined to see to it that all waste of investors' money is eliminated from reporting under section 404. We and the PCAOB are working to re-focus 404 on the statutory purpose of informing investors about weaknesses in a company's internal controls that are truly material and really matter. The information conveyed to investors about the nature of those weaknesses has to be helpful to them in making investment decisions.
The reforms we're making to the SOX 404 process are intended to be of direct benefit to America's small businesses - and the millions of Americans who work for them, invest in them, and benefit from all that they provide to our economy. We're re-orienting 404 to focus on what truly matters to investors - and away from expensive and unproductive make-work procedures that waste investors' money and distract attention from what's genuinely material. No longer will the 404 process tolerate procedures performed solely so someone can claim they considered every conceivable possibility.