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Section 404 Changes Under the Radar

By Stephen Barlas
August 1, 2017
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The United States Capitol Building

There hasn’t been much attention paid to the two changes to the Sarbanes-Oxley Act Section 404 auditing requirements contained in the Financial CHOICE Act.

 

Opposed by the Center for Audit Quality and Council of Institutional Investors, they were passed nonetheless by the House in June 2017. Section 847 of the bill provides an exemption from internal control evaluation to an issuer who has a total market capitalization of less than $500 million. Current law has a much lower ceiling of $75 million worth of public float.

 

Section 441 of the bill contains a temporary exemption from needing to get an internal control audit report for any company that ceases to be an emerging growth company (a category created by the JOBS Act) following the fifth anniversary of the date of the first sale of common equity securities, had average annual gross revenues of less than $50 million as of its most recently completed fiscal year, and isn’t a large accelerated filer.

 

Stephen Barlas has covered Washington, D.C., for trade and professional magazines since 1981 and since 1984 for Strategic Finance and its predecessor Management Accounting. You can reach him at sbarlas@verizon.net.
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