The Securities and Exchange Commission will exempt smaller public companies with less than $100 million in annual revenue from the requirement for an attestation of their internal control over financial reporting by an outside auditor. Outside audits of internal controls are still required under the Sarbanes-Oxley Act of 2002 for larger companies, also known as larger accelerated filers.
Smaller reporting companies with less than $100 million in revenues would still continue to be required to establish and maintain effective internal controls over financial reporting (ICFR), and their principal executive and financial officers would still be required to continue to certify that, among other things, they are responsible for establishing and maintaining ICFR and have evaluated and reported on the effectiveness of the company’s disclosure controls and procedures. In addition, these smaller companies would still be subject to a financial statement audit by an independent auditor, who is required to consider ICFR in the performance of that audit.
But as a result of the amendments adopted by the SEC, and unlike larger issuers, these smaller companies will no longer be required to obtain a separate attestation of their ICFR from an outside auditor. The move is part of a larger trend by the SEC to roll back financial and audit regulations, which would allow companies to redirect the associated cost savings into growing their businesses.