7450 Federal Register / Vol. 73, No. 26 / Thursday, February 7, 2008 / Proposed Rules 

1 17 CFR 210–2.02T. 

2 17 CFR 229.308T. 

3 17 CFR 228.310T. 

4 17 CFR 249.308a. 

5 17 CFR 249.308b. 

6 17 CFR 249.310. 

7 17 CFR 249.310(b). 

8 17 CFR 249.220f. 

9 17 CFR.249.240f. 

10See Release No. 33–8760 (December 15, 2006) 

[71 FR 76580] (the ‘‘2006 Release’’). 

11Although the term ‘‘non-accelerated filer’’ is 

not defined in our rules, we use it throughout this 

release to refer to an Exchange Act reporting 

company that does not meet the Rule 12b–2 

definition of either an ‘‘accelerated filer’’ or a ‘‘large 

accelerated filer.’’ 

12 15 U.S.C. 7262. 

13 17 CFR 229.308(a). We effected the 

postponement, in part, by adding temporary Item 

308T to Regulation S–K. We similarly added 

temporary Item 308T to Regulation S–B, but the 

Commission recently adopted amendments that 

will eliminate Regulation S–B effective March 15, 

2009. See Release No. 33–8876 (December 19, 2007) 

[73 FR 934]. 

14 17 CFR 229.308(b). 

15See, for example, letters of American 

Electronics Association, International Association 

of Small Broker-Dealers and Advisers, Small 

Business Entrepreneurship Council, and the Silicon 

Valley Leadership Group, Committee on Capital 

Markets Regulation on Release No. 33–8762 

(December 20, 2006) [71 FR 77635], File No. S7– 

24–06. 

SECURITIES AND EXCHANGE 

COMMISSION 

17 CFR Parts 210, 228, 229 and 249 

[Release Nos. 33–8889; 34–57258; File No. 

S7–06–03] 

RIN 3235–AJ64 

Internal Control Over Financial 

Reporting in Exchange Act Periodic 

Reports of Non-Accelerated Filers 

AGENCY: Securities and Exchange 

Commission. 

ACTION: Proposed amendments of 

temporary rules. 

SUMMARY: We are proposing to amend 

temporary rules that were published on 

December 21, 2006, in Release No. 33– 

8760 [71 FR 76580]. These temporary 

rules require companies that are nonaccelerated filers to include in their 

annual reports, pursuant to rules 

implementing Section 404(b) of the 

Sarbanes-Oxley Act of 2002, an 

attestation report of their independent 

auditor on internal control over 

financial reporting for fiscal years 

ending on or after December 15, 2008. 

Under the proposed amendments, a 

non-accelerated filer would be required 

to provide the auditor’s attestation 

report on internal control over financial 

reporting in an annual report filed for 

fiscal years ending on or after December 

15, 2009. 

DATES: Comments should be received on 

or before March 10, 2008. 

ADDRESSES: Comments may be 

submitted by any of the following 

methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/other.shtml); 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number S7–06–03 on the subject line; 

or 

• Use the Federal Rulemaking Portal 

(http://www.regulations.gov). Follow the 

instructions for submitting comments. 

Paper Comments 

• Send paper comments in triplicate 

to Nancy M. Morris, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number S7–06–03. This file number 

should be included on the subject line 

if e-mail is used. To help us process and 

review your comments more efficiently, 

please use only one method. The 

Commission will post all comments on 

the Commission’s Internet Web site 

(http://www.sec.gov/rules/other.shtml). 

Comments are also available for public 

inspection and copying in the 

Commission’s Public Reference Room, 

100 F Street, NE., Washington, DC 

20549, on official business days 

between the hours of 10 a.m. and 3 p.m. 

All comments received will be posted 

without change; we do not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. 

FOR FURTHER INFORMATION CONTACT: 

Sean Harrison, Special Counsel, Office 

of Rulemaking, Division of Corporation 

Finance, at (202) 551–3430, U.S. 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–3628. 

SUPPLEMENTARY INFORMATION: We are 

proposing to amend the following forms 

and temporary rules: Rule 2–02T of 

Regulation S–X,1 Item 308T of 

Regulation S–K,2 and S–B,3 Item 4T of 

Form 10–Q,4 Item 3A(T) of Form 10– 

QSB,5 Item 9A(T) of Form 10–K,6 Item 

8A(T) of Form 10–KSB,7 Item 15T of 

Form 20–F,8 and Instruction 3T of 

General Instruction B.(6) of Form 40–F.9

I. Background 

On December 15, 2006,10 we extended 

the dates by which non-accelerated 

filers 11 must begin to comply with the 

internal control over financial reporting 

(‘‘ICFR’’) requirements mandated by 

Section 404 of the Sarbanes-Oxley Act 

of 2002.12 Specifically, we postponed 

for five months, from fiscal years ending 

on or after July 15, 2007 to fiscal years 

ending on or after December 15, 2007, 

the date by which non-accelerated filers 

must begin to comply with the 

management report requirement in Item 

308(a) of Regulation S–K.13 We also 

postponed to fiscal years ending on or 

after December 15, 2008 the date by 

which non-accelerated filers must begin 

to comply with the auditor attestation 

report requirement in Item 308(b) of 

Regulation S–K.14 We indicated that we 

would consider further postponing the 

auditor attestation report compliance 

date after considering the anticipated 

revisions to the Public Company 

Accounting Oversight Board’s 

(‘‘PCAOB’’) Auditing Standard No. 2 

(‘‘AS No. 2’’). 

In the 2006 Release, we cited two 

primary reasons for deferring 

implementation of the auditor 

attestation report requirement for an 

additional year after implementation of 

the management report requirement. 

First, we stated that the deferred 

implementation would afford nonaccelerated filers and their auditors the 

benefit of anticipated changes by the 

PCAOB to AS No. 2, subject to 

Commission approval, as well as any 

implementation guidance that the 

PCAOB issued for auditors of smaller 

public companies. 

Second, we expected a deferred 

implementation of the auditor 

attestation requirement to save nonaccelerated filers the full potential costs 

associated with the auditor’s initial 

attestation to, and report on, 

management’s assessment of ICFR 

during the period that changes to AS 

No. 2 were being considered and 

implemented, and the PCAOB was 

formulating guidance specifically for 

auditors of smaller public companies. 

Public commenters previously have 

asserted that the ICFR compliance costs 

are likely to be disproportionately 

higher for smaller public companies 

than larger ones, and that the auditor’s 

fee represents a large percentage of 

those costs.15

Furthermore, we have learned from 

commenters, including those 

participating in our roundtables on 

implementation of the ICFR 

requirements, that while companies 

incur increased internal costs in the first 

year of compliance, some of which are 

due to ‘‘deferred maintenance’’ items 

(for example, documentation, 

remediation, etc.), these costs may 


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16Materials related to the Commission’s 2005 

Roundtable Discussion on Implementation of 

Internal Control Reporting Provisions and 2006 

Roundtable on Second-Year Experiences with 

Internal Control Reporting and Auditing Provisions, 

including the archived roundtable broadcasts, are 

available at http://www.sec.gov/spotlight/ 

soxcomp.htm. 

17See SEC Press Release 2006–75 (May 17, 2006), 

‘‘SEC Announces Next Steps for Sarbanes-Oxley 

Implementation’’ and PCAOB Press Release (May 

17, 2006), ‘‘Board Announces Four-Point Plan to 

Improve Implementation of Internal Control 

Reporting Requirements.’’

18Release No. 33–8810 (Jun. 20, 2007) [72 FR 

35324]. 

19Release No. 33–8809 (Jun. 20, 2007) [72 FR 

35310]. The rule amendments, among other things, 

provided that an evaluation that complies with our 

interpretive guidance is one way to satisfy the 

annual ICFR evaluation requirement in Exchange 

Act Rules 13a–15(c) and 15d–15(c) [17 CFR 

240.13a–15(c) and 240.15d–15(c)]. 

20See ‘‘An Audit of Internal Control that is 

Integrated with an Audit of the Financial 

Statements: Guidance for Auditors of Smaller 

Companies,’’ (October 17, 2007), available at 

www.pcaobus.org. 

21The PCAOB has not announced when it plans 

to finalize this guidance. 

22See, for example, the May 8, 2007, letter to 

Chairman Christopher Cox and Chairman Mark 

Olson from Senator John Kerry, Chairman, Senate 

Committee on Small Business and 

Entrepreneurship, and Senator Olympia Snowe, 

Ranking Member, Senate Committee on Small 

Business and Entrepreneurship, available at 

http://sbc.senate.gov/lettersout/070508-SECPCAOB-HearingFollowUp.pdf; hearing on 

‘‘Sarbanes-Oxley Section 404: New Evidence on the 

Costs for Small Businesses,’’ House Committee on 

Small Business (December 12, 2007); and the July 

12, 2007, letter from Sharon Haeger, America’s 

Community Bankers, on Release No. 34–55876 [72 

FR 32340], File No. PCAOB 2007–02, available at 

http://www.sec.gov/comments/pcaob-2007-02/ 

pcaob200702.shtml. 

decrease in the second year.16

Therefore, we anticipated that 

postponing the costs resulting from the 

auditor’s attestation report until the 

second year would help non-accelerated 

filers to smooth the cost spike that many 

accelerated filers experienced in their 

first year of compliance with the Section 

404 requirements. 

The compliance date extensions that 

we granted in 2006 were part of a series 

of actions that the Commission and 

PCAOB each announced that they 

intended to take to improve 

implementation of the internal control 

over financial reporting requirements.17

These actions included: 

• Issuance by the Commission of 

interpretive guidance for management to 

assist management in complying with 

the ICFR evaluation and disclosure 

requirements; 

• Consideration of efforts by COSO to 

provide more guidance on how the 

COSO framework on internal control 

can be applied to smaller public 

companies; 

• The PCAOB’s issuance, with 

Commission approval, of Auditing 

Standard No. 5 (‘‘AS No. 5’’), which 

replaced AS No. 2; 

• Reinforcement of auditor efficiency 

through PCAOB inspections and 

Commission oversight of the PCAOB’s 

audit firm inspection program; 

• Development, or facilitation of 

development, of implementation 

guidance for auditors of smaller public 

companies; and 

• Continuation of PCAOB forums on 

auditing in the small business 

environment. 

On June 20, 2007, we approved the 

issuance of interpretive guidance18 and 

adopted rule amendments19 to help 

public companies strengthen their ICFR 

evaluations while reducing unnecessary 

costs. The interpretive release provided 

guidance for management on how to 

conduct an evaluation of the 

effectiveness of a company’s ICFR. The 

guidance sets forth an approach by 

which management can conduct a topdown, risk-based evaluation of ICFR. 

As discussed above, on July 25, 2007, 

we approved the PCAOB’s AS No. 5, 

which replaced AS No. 2. The new 

standard sets forth the professional 

standards and related performance 

guidance for independent auditors to 

attest to, and report on, management’s 

assessment of the effectiveness of ICFR. 

Our management guidance, in 

combination with AS No. 5, was 

intended to make ICFR audits and 

management evaluations of ICFR more 

cost-effective by being risk-based and 

scalable to a company’s size and 

complexity. Although the PCAOB 

issued AS No. 5, and we approved it, 

according to our planned timetables, 

there still are some additional actions 

that the Commission and PCAOB intend 

to take that give us reason to propose a 

further extension of the auditor 

attestation report compliance date for 

non-accelerated filers. 

One of these actions is the PCAOB’s 

issuance of final staff guidance on 

auditing ICFR of smaller public 

companies. On October 17, 2007, the 

PCAOB published preliminary staff 

guidance that demonstrates how 

auditors can apply the principles 

described in AS No. 5 and provides 

examples of approaches to particular 

issues that might arise in the audits of 

smaller, less complex public 

companies.20 Topics discussed in the 

PCAOB’s guidance include: Entity-level 

controls, risk of management override, 

segregation of duties and alternative 

controls, information technology 

controls, financial reporting 

competencies, and testing controls with 

less formal documentation. The PCAOB 

sought public comment on this 

guidance, and the comment period 

ended on December 17, 2007.21

Another action involves a study that 

we are undertaking to determine 

whether the Section 404(b) auditor 

attestation requirement of the SarbanesOxley Act is being implemented in a 

manner that will be cost-effective for 

smaller reporting companies. The study 

will pay special attention to those small 

companies that are complying with the 

ICFR requirements for the first time. 

This study of costs and benefits will 

include a Web-based survey of 

companies that are subject to the ICFR 

requirements as well as in-depth 

interviews with a subset of these 

companies. Our plan is to gather data 

from a large cross-section of companies 

about the costs and benefits of 

compliance with the ICFR requirements 

and to evaluate whether the new 

management guidance and AS No. 5 are 

having the intended effect of facilitating 

more cost-effective ICFR evaluations 

and audits. Because we intend to collect 

data based on companies’ experiences, 

this study will be taking place in the 

coming months as companies for the 

first time prepare their financial 

statements and undergo external audits 

under the new AS No. 5 and/or conduct 

their internal ICFR evaluations with the 

aid of the new management guidance. 

We anticipate that the study and 

analysis of the results will be completed 

no earlier than the summer of 2008. 

We also note that others have 

expressed concerns about the orderly 

and efficient implementation of the 

ICFR requirements.22

If we do not adopt the proposed 

amendments, non-accelerated filers will 

have to begin complying with the 

auditor attestation requirement for fiscal 

years ending on or after December 15, 

2008. To accomplish this, in 2008, many 

non-accelerated filers would need to 

engage their independent auditors to 

perform integrated audits of their 

financial statements and ICFR. Without 

an extension, these companies may 

begin to incur costs before we have an 

opportunity to observe whether further 

action to improve the effectiveness and 

efficiency of Section 404 

implementation is warranted. Therefore, 

we believe that an additional one-year 

deferral of the auditor attestation 

requirement would be appropriate so 

that these companies do not incur 

unnecessary compliance costs before we 

have the benefit of the study. An 

additional one-year deferral will allow 

the PCAOB additional time during 2008 

to promulgate its guidance for ICFR 

audits of smaller public companies, as 

well as additional time for the auditors 


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7452 Federal Register / Vol. 73, No. 26 / Thursday, February 7, 2008 / Proposed Rules 

23See Item 308T(a)(4) of Regulation S–K, Item 

15T(b)(4) of Form 20–F and General Instruction 

B.(6)(3T) of Form 40–F. 

24Section 18 of the Exchange Act [15 U.S.C. 78r] 

imposes liability on any person who makes or 

causes to be made in any application or report or 

document filed under the Act, or any rule 

thereunder, any statement that ‘‘was at the time and 

in the light of the circumstances under which it was 

made false or misleading with respect to any 

material fact.’’ As a result of the temporary Item 

308T of Regulation S–K and S–B and the temporary 

amendments to Forms 20–F and 40–F, however, 

during the applicable periods, management’s report 

would be subject to liability under this section only 

in the event that a non-accelerated filer specifically 

states that the report is to be considered ‘‘filed’’

under the Exchange Act or incorporates it by 

reference into a filing under the Securities Act or 

the Exchange Act. 25 44 U.S.C. 3501 et seq. and 5 CFR 1320.11. 

of non-accelerated filers to incorporate 

such guidance in their planning and 

conduct of their ICFR audits during 

2009. 

II. Proposed Extension of Auditor 

Attestation Compliance Date for NonAccelerated Filers 

We propose to amend Item 308T of 

Regulation S–K, Rule 2–02T of 

Regulation S–X, and Forms 10–Q, 10–K, 

20–F and 40–F to require nonaccelerated filers to provide their 

auditor’s attestation in their annual 

reports filed for fiscal years ending on 

or after December 15, 2009. If we adopt 

the proposed amendments, a nonaccelerated filer would continue to be 

required to state in its management 

report on ICFR that the company’s 

annual report does not include an 

auditor attestation report.23

In the 2006 Release, we also adopted 

a temporary amendment that provided 

that the management report included in 

a non-accelerated filer’s annual report 

that did not contain the auditor’s 

attestation report would be deemed 

‘‘furnished’’ rather than ‘‘filed’’ and not 

be subject to liability under Section 18 

of the Exchange Act.24 We 

acknowledged in that release nonaccelerated filers filing only a 

management report during their first 

year of compliance with the Section 

404(a) requirements may become subject 

to more second-guessing as a result of 

separating the management report from 

the auditor’s attestation. As proposed, 

the amendments would maintain this 

distinction. 

Request for Comment 

We request and encourage any 

interested person to submit comments 

regarding the proposed amendments to 

extend the auditor attestation report 

compliance date described above. In 

particular, we solicit comment on the 

following questions: 

• Is it appropriate to provide a further 

extension of the auditor attestation 

requirement for non-accelerated filers as 

proposed? If so, should we postpone 

this requirement for an additional year 

as proposed, or would a longer or 

shorter timeframe be more appropriate? 

• How would the proposed extension 

affect investors in non-accelerated 

filers? 

• Would the proposed additional 

deferral of the auditor’s attestation 

report requirement make the application 

of the Section 404 requirements more or 

less efficient and effective for nonaccelerated filers? 

• Should management’s report on 

ICFR be ‘‘filed’’ rather than ‘‘furnished’’

during the second year of the nonaccelerated filer’s compliance with the 

ICFR requirements under Section 404(a) 

if we adopt the proposed extension? 

III. Paperwork Reduction Act 

In connection with our original 

proposal and adoption of the rules and 

amendments implementing the Section 

404 requirements, we submitted cost 

and burden estimates of the collection 

of information requirements of the 

amendments to the Office of 

Management and Budget (‘‘OMB’’). We 

published a notice requesting comment 

on the collection of information 

requirements in the proposing release 

for the rule amendments. We submitted 

these requirements to the OMB for 

review in accordance with the 

Paperwork Reduction Act of 1995 

(‘‘PRA’’) 25 and received approval of 

these estimates. We do not believe that 

the proposed extension will result in 

any change in the collection of 

information requirements of the 

amendments implementing Section 404. 

Therefore, we are not revising our PRA 

burden and cost estimates submitted to 

the OMB. 

IV. Cost-Benefit Analysis 

A. Benefits 

The proposed amendments would 

postpone for one year the date by which 

a non-accelerated filer would be 

required to include in its annual report 

an auditor attestation report on 

management’s assessment of internal 

control over financial reporting. As a 

result, all non-accelerated filers would 

be required to complete only 

management’s assessment in their first 

and second year of their compliance 

with the Section 404 requirements. 

We plan to conduct a study to assess 

whether the Section 404(b) auditor 

attestation requirement of the SarbanesOxley Act is being implemented in a 

manner that will be cost-effective for 

smaller reporting companies. Our 

management guidance and the new 

auditing standard were designed to 

make management evaluations and ICFR 

audits more cost-effective. We believe 

that an additional one-year deferral of 

the auditor attestation report 

requirement would benefit nonaccelerated filers by helping smaller 

companies avoid incurring unnecessary 

compliance costs as we determine 

whether further action to improve the 

effectiveness and efficiency of Section 

404 implementation is warranted. In 

addition, we believe that nonaccelerated filers may experience the 

following additional benefits from the 

proposed extension: 

• Auditors of non-accelerated filers 

would have significantly more time to 

conform their ICFR audit approach to 

meet the requirements of AS No. 5, and 

to consider the PCAOB’s guidance for 

auditors of smaller public companies; 

and 

• Non-accelerated filers would have 

additional time to focus on their 

approach for evaluating and reporting 

on the effectiveness of ICFR. This may 

facilitate their efforts to develop best 

practices and efficiencies in preparing 

the management report prior to 

becoming subject to the auditor 

attestation report requirement. 

B. Costs 

If we adopt the proposed 

amendments, investors in nonaccelerated filers will have to wait 

longer than they would in the absence 

of the proposed extension for the 

assurances provided by the attestation 

report by the companies’ auditor on 

management’s report on ICFR and the 

added investor confidence that could 

result. The proposed amendments may 

increase the risk that, without the 

auditor’s attestation, some nonaccelerated filers may erroneously 

conclude that the company’s ICFR is 

effective, when an ICFR audit might 

reveal that it is not. In addition, some 

companies may conduct an assessment 

that is not as thorough, careful and as 

appropriate to the company’s 

circumstances as they would perform if 

the auditor were also conducting an 

audit of ICFR. The proposed 

amendments may also increase the risk 

that weaknesses in a company’s ICFR 

will go undetected for a longer period of 

time. 

We request data to quantify the 

potential costs and benefits described 

above. We seek estimates of these costs 

and benefits, as well as any costs and 

benefits that we have not identified that 

may result from the adoption of these 

proposed amendments. We also request 


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26 5 U.S.C. 603. 

27 15 U.S.C. 78w(a). 

28 15 U.S.C. 77b(b). 

29 15 U.S.C. 78c(f). 30 5 U.S.C. 601. 31 17 CFR 240.0–10(a). 

qualitative feedback on the nature of the 

potential benefits and costs described 

above and any benefits and costs we 

may have overlooked. 

V. Consideration of Impact on the 

Economy, Burden on Competition and 

Promotion of Efficiency, Competition 

and Capital Formation 

For purposes of the Small Business 

Regulatory Enforcement Fairness Act of 

1996, or ‘‘SBREFA,’’ 26 we solicit data to 

determine whether the proposals 

constitute a ‘‘major’’ rule. Under 

SBREFA, a rule is considered ‘‘major’’

where, if adopted, it results or is likely 

to result in: 

• An annual effect on the economy of 

$100 million or more (either in the form 

of an increase or a decrease); 

• A major increase in costs or prices 

for consumers or individual industries; 

or 

• Significant adverse effects on 

competition, investment or innovation. 

We request comment on the potential 

impact of the proposals on the economy 

on an annual basis. Commenters are 

requested to provide empirical data and 

other factual support for their views if 

possible. 

Section 23(a)(2) of the Exchange 

Act 27 also requires us, when adopting 

rules under the Exchange Act, to 

consider the impact that any new rule 

would have on competition. Section 

23(a)(2) prohibits us from adopting any 

rule that would impose a burden on 

competition not necessary or 

appropriate in furtherance of the 

purposes of the Exchange Act. In 

addition, Section 2(b) 28 of the Securities 

Act and Section 3(f) 29 of the Exchange 

Act require us, when engaging in 

rulemaking where we are required to 

consider or determine whether an action 

is necessary or appropriate in the public 

interest, to also consider whether the 

action will promote efficiency, 

competition, and capital formation. 

We believe that taking additional time 

to evaluate how efficiently the Section 

404(b) process is being implemented 

reduces the possibilities of needless 

inefficiencies and transition costs for 

non-accelerated filers. Further, if the 

costs incurred by companies are 

unnecessarily high, companies may find 

it difficult to grow and may experience 

barriers to capital formation. We expect 

that this additional one-year delay of the 

auditor attestation report requirement 

will make the implementation process 

more efficient and less costly for nonaccelerated filers, which should 

promote efficiency and capital 

formation. 

It is possible that a competitive 

impact could result from the differing 

treatment of non-accelerated filers and 

larger companies that already have been 

complying with the Section 404 

requirements, but we do not expect that 

the extension will have any measurable 

effect on competition. We solicit public 

comment that will assist us in assessing 

the impact that the proposed 

amendments could have on 

competition, efficiency and capital 

formation. 

VI. Initial Regulatory Flexibility 

Analysis 

This Initial Regulatory Flexibility 

Analysis (‘‘IRFA’’) has been prepared in 

accordance with the Regulatory 

Flexibility Act.30 This IRFA involves 

proposed amendments to temporary 

rules Item 308T of Regulation S–K and 

S–B, Rule 2–02T of Regulation S–X, 

Item 4T of Form 10–Q, Item 3A(T) of 

Form 10–QSB, Item 9A(T) of Form 10–

K, Item 8A(T) of Form 10–KSB, Item 

15T of Form 20–F, and Instruction 3T of 

General Instruction B.(6) of Form 40–F. 

A non-accelerated filer is currently 

required to start providing its auditor’s 

attestation report on ICFR in its annual 

report for fiscal years ending on or after 

December 15, 2008. We propose to 

amend these forms and temporary rules 

to require a non-accelerated filer to start 

providing its auditor’s attestation report 

on ICFR in annual reports for fiscal 

years ending on or after December 15, 

2009. 

A. Reasons for the Proposed 

Amendments 

The Commission plans to complete a 

study of the costs and benefits of 

companies’ Section 404 

implementation. We are proposing to 

defer the implementation of the auditor 

attestation report requirement for nonaccelerated filers for an additional year 

for the following reasons, among others 

discussed above: 

• To enable non-accelerated filers 

more time to prepare and gain 

efficiencies in the review and evaluation 

of the effectiveness of internal control 

over financial reporting; 

• To provide the Commission with 

time to review the findings of its study 

and to consider whether further action 

to improve the effectiveness and 

efficiency of Section 404 

implementation is warranted; 

• To provide the PCAOB additional 

time to promulgate its guidance for ICFR 

audits of smaller public companies; and 

• To provide the auditors of nonaccelerated filers additional time to 

consider such guidance. 

B. Objectives 

The proposed amendments aim to 

further the goals of the Sarbanes-Oxley 

Act to enhance the quality of public 

company disclosure concerning the 

company’s internal control over 

financial reporting and increase investor 

confidence in the financial markets. 

C. Legal Basis 

We are issuing the proposals under 

the authority set forth in Section 19 of 

the Securities Act, Sections 3, 12, 13, 

15, 23 and 36 of the Exchange Act, and 

Sections 3(a) and 404 of the SarbanesOxley Act. 

D. Small Entities Subject to the 

Proposed Amendments 

The proposed changes would affect 

some issuers that are small entities. 

Exchange Act Rule 0–10(a) 31 defines an 

issuer, other than an investment 

company, to be a ‘‘small business’’ or 

‘‘small organization’’ if it had total 

assets of $5 million or less on the last 

day of its most recent fiscal year. We 

estimate that there are approximately 

1,100 issuers, other than registered 

investment companies, that may be 

considered small entities. The proposed 

amendments would apply to any small 

entity that is subject to reporting under 

either Section 13(a) or 15(d) of the 

Exchange Act. 

E. Reporting, Recordkeeping, and Other 

Compliance Requirements 

The proposed amendments would 

alleviate reporting and compliance 

burdens by postponing by an additional 

year the date by which non-accelerated 

filers must begin to comply with the 

auditor attestation report on ICFR in 

their annual reports. 

F. Duplicative, Overlapping, or 

Conflicting Federal Rules 

The ICFR requirements do not 

duplicate, overlap, or conflict with other 

federal rules. 

G. Significant Alternatives 

The Regulatory Flexibility Act directs 

us to consider alternatives that would 

accomplish our stated objectives, while 

minimizing any significant adverse 

impact on small entities. In connection 

with the proposed amendments, we 

considered the following alternatives: 


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7454 Federal Register / Vol. 73, No. 26 / Thursday, February 7, 2008 / Proposed Rules 

• Establishing different compliance or 

reporting requirements or timetables 

that take into account the resources 

available to small entities; 

• Clarifying, consolidating or 

simplifying compliance and reporting 

requirements under the rules for small 

entities; 

• Using performance rather than 

design standards; and 

• Exempting small entities from all or 

part of the requirements. 

The proposed amendments would 

establish a different compliance and 

reporting timetable for small entities. 

We believe that the proposed 

amendments would promote the 

primary goal of enhancing the quality of 

reporting and increasing investor 

confidence in the fairness and integrity 

of the securities markets. Therefore we 

do not believe exempting small entities 

from the proposed amendments would 

be appropriate. 

H. Solicitation of Comments 

We encourage the submission of 

comments with respect to any aspect of 

this Initial Regulatory Flexibility 

Analysis. In particular, we request 

comments regarding: 

• The number of small entity issuers 

that may be affected by the proposed 

amendments; 

• The existence or nature of the 

potential impact of the proposed 

amendments on small entity issuers 

discussed in the analysis; and 

• How to quantify the impact of the 

proposed amendments. 

Commenters are asked to describe the 

nature of any impact and provide 

empirical data supporting the extent of 

the impact. Such comments will be 

considered in the preparation of the 

Final Regulatory Flexibility Analysis, if 

we adopt the proposed amendments, 

and will be placed in the same public 

file as comments on the proposed 

amendments themselves. 

VII. Statutory Authority and Text of the 

Proposed Amendments 

The amendments described in this 

release are being proposed under the 

authority set forth in Section 19 of the 

Securities Act, Sections 3, 12, 13, 15, 23 

and 36 of the Exchange Act, and 

Sections 3(a) and 404 of the SarbanesOxley Act. 

List of Subjects 

17 CFR Part 210 

Accountants, Accounting, Reporting 

and recordkeeping requirements, 

Securities. 

17 CFR Part 228 

Reporting and recordkeeping 

requirements, Securities, Small 

businesses. 

17 CFR Parts 229 and 249 

Reporting and recordkeeping 

requirements, Securities. 

Text of Proposed Amendments 

For the reasons set out in the 

preamble, the Commission proposes to 

amend title 17, chapter II, of the Code 

of Federal Regulations as follows: 

PART 210—FORM AND CONTENT OF 

AND REQUIREMENTS FOR FINANCIAL 

STATEMENTS, SECURITIES ACT OF 

1933, SECURITIES EXCHANGE ACT 

OF 1934, PUBLIC UTILITY HOLDING 

COMPANY ACT OF 1935, INVESTMENT 

COMPANY ACT OF 1940, INVESTMENT 

ADVISERS ACT OF 1940, AND 

ENERGY POLICY AND 

CONSERVATION ACT OF 1975 

1. The authority citation for part 210 

continues to read as follows: 

Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 

77z–2, 77z–3, 77aa(25), 77aa(26), 78c, 78j–1, 

78l, 78m, 78n, 78o(d), 78q, 78u–5, 78w(a), 

78ll, 78mm, 80a–8, 80a–20, 80a–29, 80a–30, 

80a–31, 80a–37(a), 80b–3, 80b–11, 7202, 

7218 and 7262, unless otherwise noted. 

2. Section 210.2–02T is amended by: 

a. Removing paragraphs (a) and (b), 

and redesignating paragraphs (c) and (d) 

as paragraphs (a) and (b); 

b. Revising the date ‘‘December 15, 

2008’’ in newly redesignated paragraph 

(a) to read ‘‘December 15, 2009’’; and 

c. Revising newly redesignated 

paragraph (b). 

The revision reads as follows: 

§ 210.2–02T Accountants’ reports and 

attestation reports on internal control over 

financial reporting. 

* * * * * 

(b) This section expires on June 30, 

2010. 

PART 228—INTEGRATED 

DISCLOSURE SYSTEM FOR SMALL 

BUSINESS ISSUERS 

2. The authority citation for part 228 

continues to read, in part, as follows: 

Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 

77k, 77s, 77z–2, 77z–3, 77aa(25), 77aa(26), 

77ddd, 77eee, 77ggg, 77hhh, 77jjj, 77nnn, 

77sss, 78l, 78m, 78n, 78o, 78u–5, 78w, 78ll, 

78mm, 80a–8, 80a–29, 80a–30, 80a–37, 80b–

11, and 7201 et seq., and 18 U.S.C. 1350. 

* * * * * 

§ 228.308T [Amended] 

3. Section 228.308T is amended by 

revising the date ‘‘December 15, 2008’’

in the ‘‘Note to Item 308T’’ to read 

‘‘March 15, 2009’’. 

PART 229—STANDARD 

INSTRUCTIONS FOR FILING FORMS 

UNDER SECURITIES ACT OF 1933, 

SECURITIES EXCHANGE ACT OF 1934 

AND ENERGY POLICY AND 

CONSERVATION ACT OF 1975—

REGULATION S–K 

4. The authority citation for part 229 

continues to read, in part, as follows: 

Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 

77k, 77s, 77z–2, 77z–3, 77aa(25), 77aa(26), 

77ddd, 77eee, 77ggg, 77hhh, 77iii, 77jjj, 

77nnn, 77sss, 78c, 78i, 78j, 78l, 78m, 78n, 

78o, 78u–5, 78w, 78ll, 78mm, 80a–8, 80a–9, 

80a–20, 80a–29, 80a–30, 80a–31(c), 80a–37, 

80a–38(a), 80a–39, 80b–11, and 7201 et seq.; 

and 18 U.S.C. 1350, unless otherwise noted. 

* * * * * 

§ 228.309T [Amended] 

5. Section 229.308T is amended by: 

a. Revising the date ‘‘December 15, 

2008’’ in the ‘‘Note to Item 308T’’ to 

read ‘‘December 15, 2009’’; and 

b. Revising the date ‘‘June 30, 2009’’

in paragraph (c) to read ‘‘June 30, 2010’’. 

PART 249—FORMS, SECURITIES 

EXCHANGE ACT OF 1934 

6. The general authority citation for 

part 249 is revised to read as follows: 

Authority: 15 U.S.C. 78a et seq. and 7201 

et seq.; and 18 U.S.C. 1350, unless otherwise 

noted. 

* * * * * 

7. Form 20–F (referenced in 

§ 249.220f), Part II, Item 15T is amended 

by: 

a. Revising the date ‘‘December 15, 

2008’’ in paragraph (2) to the ‘‘Note to 

Item 15T’’ to read ‘‘December 15, 2009’’; 

and 

b. Revising the date ‘‘June 30, 2009’’

in paragraph (d) to read ‘‘June 30, 

2010’’. 

Note: The text of Form 20–F does not, and 

this amendment will not, appear in the Code 

of Federal Regulations. 

8. Form 40–F (referenced in 

§ 249.240f) is amended by: 

a. Revising the date ‘‘December 15, 

2008’’ in ‘‘Instruction 3T(2)’’ to the 

‘‘Instructions to paragraphs (b), (c), (d) 

and (e) of General Instruction B.(6)’’ to 

read ‘‘December 15, 2009’’; and 

b. Revising the date ‘‘June 30, 2009’’

in the paragraph following ‘‘Instruction 

3T’’ to the ‘‘Instructions to paragraphs 

(b), (c), (d) and (e) of General Instruction 

B.(6)’’ to read ‘‘June 30, 2010’’. 

Note: The text of Form 40–F does not, and 

this amendment will not, appear in the Code 

of Federal Regulations. 

9. Form 10–Q (referenced in 

§ 249.308a) is amended by revising Item 

4T to Part I to read as follows: 


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Federal Register / Vol. 73, No. 26 / Thursday, February 7, 2008 / Proposed Rules 7455 

Note: The text of Form 10–Q does not, and 

this amendment will not, appear in the Code 

of Federal Regulations. 

Form 10–Q 

* * * * * 

Part I—Financial Information 

* * * * * 

Item 4T. Controls and Procedures 

(a) If the registrant is neither a large 

accelerated filer nor an accelerated filer 

as those terms are defined in § 240.12b–

2 of this chapter, furnish the 

information required by Items 307 and 

308T(b) of Regulation S–K (17 CFR 

229.307 and 229.308T(b)) with respect 

to a quarterly report that the registrant 

is required to file for a fiscal year ending 

on or after December 15, 2007 but before 

December 15, 2009. 

(b) This temporary Item 4T will expire 

on June 30, 2010. 

* * * * * 

10. Form 10–QSB (referenced in 

§ 249.308b) is amended by revising Item 

3A(T) to Part I to read as follows: 

Note: The text of Form 10–QSB does not, 

and this amendment will not, appear in the 

Code of Federal Regulations. 

Form 10–QSB 

* * * * * 

Part I—Finanacial Information 

* * * * * 

Item 3A(T). Controls and Procedures 

(a) Furnish the information required 

by Items 307 and 308T(b) of Regulation 

S–B (17 CFR 228.307 and 228.308T(b)) 

with respect to a quarterly report that 

the small business issuer is required to 

file for a fiscal year ending on or after 

December 15, 2007 but before October 

31, 2008. 

* * * * * 

11. Form 10–K (referenced in 

§ 249.310) is amended by: 

a. Revising the date ‘‘December 15, 

2008’’ in paragraph (a) to Item 9A(T) to 

Part II to read ‘‘December 15, 2009’’; and 

b. Revising the date ‘‘June 30, 2009’’

in paragraph (b) to Item 9A(T) to Part II 

to read ‘‘June 30, 2010’’. 

Note: The text of Form 10–K does not, and 

this amendment will not, appear in the Code 

of Federal Regulations. 

12. Form 10–KSB (referenced in 

§ 249.310b) is amended by revising the 

date ‘‘December 15, 2008’’ in paragraph 

(a) to Item 8A(T) to Part II to read 

‘‘March15, 2009’’. 

Note: The text of Form 10–KSB does not, 

and this amendment will not, appear in the 

Code of Federal Regulations. 

By the Commission. 

Dated: February 1, 2008. 

Nancy M. Morris, 

Secretary. 

[FR Doc. E8–2211 Filed 2–6–08; 8:45 am] 

BILLING CODE 8011–01–P 


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