New Jersey Rep. Scott Garrett has introduced a measure thatwould exempt small public companies from complying with Section 404of the Sarbanes-Oxley action, which requires them to report on theeffectiveness of their internal controls. The deadline forcompliance for small companies–those with public floats of lessthan $75 million–has been delayed several times, but the Securitiesand Exchange Commission (SEC) announced in early October that suchcompanies would have to comply with SOX 404 in fiscal years endingon or after June 15, 2010.

Republican Garrett's bill, the Small Business SOX ComplianceRelief Act, aims to spare small businesses “burdensome reportingrequirements,” he said in a press release. The release notes aSeptember SEC report that said a majority of businesses felt “thecosts of [SOX 404] compliance outweighed the benefits.”

SOX 404 cost concerns center on audit fees, since a company'soutside auditors have to attest to the effectiveness of itscontrols. A paper earlier this year by R. Mithu Dey of theRochester Institute of Technology and Mary Sullivan of GeorgeWashington University found that companies that began complyingwith SOX 404 in 2007 saw a median increase of 37% in their auditfees. The authors say there is no statistically significantevidence that Auditing Standard No. 5, introduced in 2006 tocontain the cost of SOX 404 audits, had an effect on costs in2007.