The Sarbanes-Oxley Act requires that the management of public companies assess the effectiveness of the internal control of issuers for financial reporting.  Section 404(b) requires a publicly-held company’s auditor to attest to, and report on, management’s assessment of its internal controls.  Learn more from the Management Guide for SOX §404 produced by the Institute of Internal Auditors.

​

In April 2012, The Jumpstart our Business Startups Act (JOBS Act) was signed into law.  It would generally exempt a new public company from compliance with section 404(b) for the first 5 years it is a public company as long as it does not exceed certain market capitalization or revenue thresholds (called an Emerging Growth Company, or EGC). This Act extends an existing two-year regulatory delay in the implementation of section 404(b) for companies who have had an initial public offering. Importantly, it does not contain an exemption. The Act also contains two provisions urged by the AICPA.  The first allows an EGC to opt-out from being treated as an EGC.  The second makes it clear that existing public companies cannot take advantage of the EGC exemptions even if they otherwise meet the criteria (not exceeding the market capitalization or revenue thresholds and less than 5 years since the IPO).