I 
109TH CONGRESS 
2D SESSION 
H. R. 5405 
To reduce the burdens of the implementation of section 404 of the Sarbanes- 
Oxley Act of 2002. 
IN THE HOUSE OF REPRESENTATIVES 
MAY 17, 2006 
Mr. FEENEY (for himself, Mr. MEEKS of New York, Mr. SESSIONS, Mrs. MIL-
LER of Michigan, Mr. HENSARLING, Mr. JONES of North Carolina, Ms. 
FOXX, Mr. GARRETT of New Jersey, Mr. STEARNS, Mr. TIAHRT, Mr. 
WICKER, Mr. ROYCE, Mr. PENCE, and Mr. FLAKE) introduced the fol-
lowing bill; which was referred to the Committee on Financial Services 
A BILL 
To reduce the burdens of the implementation of section 404 
of the Sarbanes-Oxley Act of 2002. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Competitive and Open 
Markets that Protect and Enhance the Treatment of En-
trepreneurs Act’’ or the ‘‘COMPETE Act’’. 
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SEC. 2. IMPLEMENTATION OF INTERNAL CONTROL RE-
PORTING AND ASSESSMENT. 
Section 404 of the Sarbanes-Oxley Act of 2002 is 
amended— 
(1) in subsection (a), by striking ‘‘The Commis-
sion’’ and inserting ‘‘Subject to subsections (c), (d), 
and (e), the Commission’’; 
(2) in subsection (b), by inserting ‘‘subject to 
subsections (c), (d), and (e),’’ after ‘‘for the issuer 
shall’’; and 
(3) by adding at the end the following new sub-
sections: 
‘‘(c) SMALLER PUBLIC COMPANY EXEMPTION.—The 
Commission’s rules under subsection (a) shall permit an 
issuer to elect voluntarily not to provide the assessment 
described in subsection (a)(2) and the attestation thereof 
described in subsection (b) if the issuer— 
‘‘(1) has a total market capitalization for the 
relevant reporting period of less than $700,000,000; 
‘‘(2) has total product revenue for that report-
ing period of less than $125,000,000; 
‘‘(3) the issuer has fewer than 1500 record ben-
eficial holders; 
‘‘(4) the issuer has been subject to the require-
ments of sections 13(a) or 15(d) of the Securities 
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Exchange Act of 1934 for a period of less than 
twelve calendar months; or 
‘‘(5) the issuer has not filed, and was not re-
quired to file, an annual report pursuant to section 
13(a) or 15(d) of the Securities Exchange Act of 
1934. 
‘‘(d) RANDOM AUDITS.—The Commission’s rules 
under this section shall provide that, after the first year 
for which an attestation and report is made by a registered 
public accounting firm under subsection (b), the assess-
ment by the management of the issuer under subsection 
(a)(2) shall be subject to examination, attestation, and re-
port on a schedule determined by a system of random se-
lection, as specified in such rules. The Commission shall 
specify in such rules that not less than 10 percent of the 
issuers listed on each national securities exchange will an-
nually be subjected to such examination, attestation, and 
report. Such random selection system shall be adminis-
tered by the national securities exchange on which the se-
curities of the issuer are listed. 
‘‘(e) DE MINIMUS STANDARD; ADDITIONAL GUID-
ANCE; INDEPENDENCE.—In implementing the require-
ments of this section, the Commission and the Board— 
‘‘(1) shall alter the standard for review from a 
remote likelihood standard for noting weaknesses 
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under this section to a 5 percent de minimus mate-
rial weakness criteria (based on 5 percent of net 
profits); 
‘‘(2) specific guidelines for measuring the terms 
‘reasonable’, ‘significant’, and ‘sufficient’ in the con-
text of internal control over financial reporting for 
issuers, including— 
‘‘(A) reference to specific examples of the 
appropriate application of those terms; and 
‘‘(B) establishment of a means for timely 
response by the Commission or Board, as appli-
cable, to requests by issuers and registered pub-
lic accounting firms for guidance as to the ap-
propriate application of those terms; and 
‘‘(3) shall modify the rules concerning the inde-
pendence of registered public accounting firms to 
perform assessments under subsection (b) to allow 
prudent interaction between such firms and internal 
consultants.’’. 
SEC. 3. BRITISH ACCOUNTING SYSTEM STUDY. 
The Securities and Exchange Commission and the 
Public Company Accounting Oversight Board shall jointly 
conduct a study comparing and contrasting the principles- 
based Turnbull Guidance under the securities laws of 
Great Britain to the implementation of section 404 of the 
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Sarbanes-Oxley Act of 2002. The Commission and the 
Board shall submit a report on the results of such study 
to the Congress not later than one year after the date of 
enactment of this Act. 
Æ 
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