Small businesses are about to get help complying with the stringent new internal control requirements of the Sarbanes-Oxley Act.
The Committee of Sponsoring Organizations (COSO) announced Monday that it will develop guidance that will help small firms follow the new rules without breaking their budgets, according to Dow Jones Newswires.
The new guidance, which will be produced by PricewaterhouseCoopers LLC, will be available online by June 30. COSO Chairman Larry Rittenberg estimated that 5,000 public companies with annual sales of less than $200 million can be helped from the new tips.
Even large companies, with far more resources and employees, have felt overburdened by the regulations outlined in Sarbanes-Oxley, the corporate reform legislation approved by Congress in 2002 in response to a series of massive accounting scandals.
Rittenberg said smaller companies must comply with the rules this year, and COSO hopes to address the question of how small firms can tighten internal controls without hiring more people. One way to prevent fraud is to ensure that financial responsibilities are delegated among different employees so no one person has too much control.
Rittenberg suggested that software programs and automation can help small businesses meet the demands of the new requirements.
"Small businesses are at risk if they don't have good controls and we've got to accept that," said Rittenberg. But, he added, "there may be alternative ways to achieve the same objectives."
The private-sector group is launching this new venture at the urging of Donald Nicolaisen, the Securities and Exchange Commission's Chief Accountant. Rittenberg said COSO is taking on the task because "Don asked us to take a look at it."
COSO's existing guidance on internal controls will not change, but it will include more detail and more examples of how small firms with fewer resources can comply.
Leading the project is Miles Everson, a partner at PricewaterhouseCoopers who helped the Big Four accounting firms create recommendations on risk management for COSO, Dow Jones Newswires reported. COSO will take ownership over the final product, as it will review and possibly revise PwC's guidance as a way to resolve auditor-independence concerns.
COSO, formed in 1985, consists of the American Institute of Certified Public Accountants, the American Accounting Association, Financial Executives International, the Institute of Management Accountants and the Institute of Internal Auditors.