SEC to Increase Number of Issuers Exempt from Auditor Attestation Requirement
Several hundreds more U.S. public companies will soon be exempt from the Sarbanes-Oxley Act auditor attestation requirements following the U.S. Securities and Exchange Commission’s (the “SEC”) recent adoption of amendments to the definitions of the terms “larger accelerated filer” and “accelerated filer” to exclude certain smaller reporting companies (“SRCs”).
Sarbanes-Oxley Act Section 404(b) requires accelerated and large accelerated filers to have the independent accounting firm that prepares or issues their financial statement audit report to attest to, and report on, management’s assessment of the effectiveness of their internal controls over financial reporting (“ICFR”). Non-accelerated filers (i.e., any issuer that is not an accelerated or large accelerated filer) are exempt from the auditor attestation requirements.
Among other things, the amendments:
- Exempt more issuers from the auditor attestation requirements by excluding from the definitions of accelerated and large accelerated filer any issuer that is eligible to be an SRC, and had annual revenues of less than US$100m;
- Make it easier for issuers to transition from a large accelerated filer to an accelerated filer, or from an accelerated filer to a non-accelerated filer, by:
- > Increasing the transition thresholds for accelerated and large accelerated filers becoming non-accelerated filers from US$50m to US$60m and for exiting large accelerated filer status from US$500m to US$560m;
- > Adding the SRC revenue test as a way to transition from accelerated or large accelerated filer status; and
- Add a check box to the cover pages of annual reports on Forms 10-K, 20-F, and 40-F to indicate whether an auditor attestation is included in the filing.
The amendments will become effective 30 days after they are published in the Federal Register. They will apply to an annual report filing due on or after the effective date, but even if the annual report is for a fiscal year ending before the effective date, the issuer may apply the amendments to determine its status.
Read the full publication here.