Letter Supporting Kanjorski, Frank, Sarbanes and Cohen Amendment to the Wall Street Reform and Consumer Protection Act of 2009 (H.R. 4173) Concerning Section 404(b) of the Sarbanes-Oxley ActDecember 10, 2009 The Honorable Congressman Eric Cantor Dear Congressman Eric Cantor: On behalf of the 8,900 members of the Virginia Society of CPAs (VSCPA), we ask your support for the Kanjorski, Frank, Sarbanes and Cohen amendment to the Wall Street Reform and Consumer Protection Act of 2009 (H.R. 4173) concerning section 404(b) of the Sarbanes-Oxley Act. The amendment would revise section 7606 of the bill by deleting the exemption for non-accelerated filers (those public companies with a market capitalization less than $75 million) from the provisions of section 404(b) of the Sarbanes-Oxley Act of 2002. The balance of section 7606 and section 7415 will be left in place, which between them provides for substantive studies to be made of the impact of section 404(b), and how that impact can be eased on all public companies with a market capitalization of less than $250 million. Section 404(b) requires an audit of the management assertions made regarding the company’s internal controls for financial reporting. The Sarbanes-Oxley Act was enacted to protect all investors in public companies by increasing the accuracy and transparency of financial reporting. Effective internal controls are the bedrock of reliable financial reporting, and are a first line of defense for preventing and detecting errors and fraud. By enacting the Sarbanes-Oxley Act, Congress clearly viewed management and auditor reports on internal controls necessary to assure investors of the reliability of the reports that are used to make investment decisions every day. We are mindful of the cost to conducting such an audit. The 2007 adoption by the Public Company Accounting Oversight Board (PCAOB) of Auditing Standard No. 5 brought significant improvements to the internal control audit. In addition, the PCAOB created a task force and developed additional guidance to apply the requirements of the auditing standard in audits of smaller companies. This guidance was developed with assistance from the auditors of small companies and helps explain how to tailor audit procedures to a small company’s particular facts and circumstances, thereby lessening the burden of the audit. We strongly support investor protections, and do not believe that giving lesser protections to investors of small companies is appropriate. When the studies required by the bill are completed, they should provide a roadmap to greater efficiencies in the audit process without reducing investor protections. We urge your support of this amendment. Thank you for your consideration. If we can be of any service to you, please contact me or VSCPA Government Affairs Director Emily Walker at ewalker@vscpa.com or (804) 612-9428. Sincerely, James K. Walker, CPA cc: American Institute of CPAs (AICPA) LAST UPDATED 12/10/2009
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