WASHINGTON (AFX) - Regulators are moving toward revising rules for corporate financial controls in response to business complaints that they are overly burdensome and expensive. First, though, the Securities and Exchange Commission and the board that oversees the accounting industry are attempting to resolve differences over changes to be made to a key requirement of a 2002 anti-fraud law enacted after the wave of corporate scandals.
SEC Chairman Christopher Cox and Mark W. Olson, chairman of the Public Company Accounting Oversight Board, met Sunday to discuss differing approaches toward the key part of the Sarbanes-Oxley law that arose from the scandals: the requirement for companies to file reports on the strength of their internal financial controls and to fix any problems.
Cox urged, in a recent letter to the independent accounting oversight board, that it revise its auditing rules under the requirement to adapt them to the size of the company whose books are being audited.
Cox's approach 'is highly inconsistent with the Sarbanes-Oxley Act ...,' said Lynn Turner, a former SEC chief accountant. 'It seems it clearly is not in investors' best interests.'
SEC spokesman John Nester had no immediate comment on the meeting, which was first reported in Saturday's editions of The Washington Post. Spokesmen for the accounting board did not immediately return a call to their office Sunday.
An advisory committee appointed by the SEC formally proposed in April that the agency exempt smaller companies from the internal-controls requirement -- a move that would affect about 70 percent of all public companies in the United States.
The SEC rejected that idea but said it will take a series of actions meant to improve the way the law works, including providing guidance to companies of all sizes on complying with it. That would allow companies to take a broad approach to the requirement, focusing on the parts of their business that present the biggest potential financial risk.
Cox and the other four SEC commissioners are expected to tentatively adopt the changes at a public meeting on Dec. 13.
With the string of scandals that began with Enron Corp.'s collapse nearly five years ago fading further from memory, business interests have been pushing for a softening of the laws and rules enacted in response to the crisis. Two groups -- one formed by the U.S. Chamber of Commerce, the other an independent committee of business, legal and academic figures -- are drafting proposals touching on corporate governance rules, class-action lawsuits against companies and executives, criminal prosecution of companies by the government and other areas.
Such changes benefiting corporate America aren't expected to come through legislation, even with some business-friendly Democrats now taking over power positions in Congress -- such as Rep. Barney Frank of Massachusetts, in line to become chairman of the House Financial Services Committee -- following the Democratic victory in last week's midterm elections.
Rather, the business groups are focusing efforts on the anticipated administrative changes by the SEC and the accounting oversight board.
In the last few years, business interests -- especially smaller public companies -- have been complaining vocally and publicly about the costs of complying with the internal-controls requirement under Sarbanes-Oxley. The Chamber of Commerce, meanwhile, has been waging a legal assault against what it views as excessive regulation since 2002, suing the SEC over rules and scoring several victories in high courts.
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