I 
110TH CONGRESS 
1ST SESSION H. R. 1780 
To improve the implementation of section 404 of the Sarbanes-Oxley Act 
of 2002. 
IN THE HOUSE OF REPRESENTATIVES 
MARCH 29, 2007 
Mr. KIRK (for himself, Mr. ISRAEL, Mr. SENSENBRENNER, and Mr. REGULA) 
introduced the following bill; which was referred to the Committee on Fi-
nancial Services 
A BILL 
To improve 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 ‘‘Small Business Securi-
ties Protection Act’’. 
SEC. 2. ADDITIONAL IMPLEMENTATION REQUIREMENTS. 
Section 404 of Sarbanes-Oxley Act of 2002 (15 
U.S.C. 7262) is amended by adding at the end the fol-
lowing new subsections: 
VerDate Aug 31 2005 
05:03 Apr 03, 2007
Jkt 059196
PO 00000
Frm 00001
Fmt 6652
Sfmt 6201
E:\BILLS\H1780.IH
H1780
mstockstill on PROD1PC66 with BILLS
‘‘(c) IMPLEMENTATION.—Within 90 days after the 
date of enactment of the Small Business Securities Protec-
tion Act, the Commission shall prescribe rules, or amend 
existing rules, and the Board shall amend standards, in 
each case as applicable to issuers under subsections (a) 
and (b) of this section, that incorporate the following: 
‘‘(1) risk-based concepts in evaluating and as-
sessing internal control over financial reporting for 
issuers, including— 
‘‘(A) the establishment of priority stand-
ards and identification of higher risk internal 
control areas that are to be assessed; 
‘‘(B) the frequency of testing of internal 
control areas; 
‘‘(C) time periods for implementing con-
trols following operational changes or additions; 
and 
‘‘(D) standards for auditors to rely on 
management workpapers in internal control as-
sessments; 
‘‘(2) specific guidelines for measuring the terms 
‘material’, ‘reasonable’, ‘significant’, and ‘sufficient’ 
in the context of internal control over financial re-
porting for issuers, including— 
VerDate Aug 31 2005 
05:03 Apr 03, 2007
Jkt 059196
PO 00000
Frm 00002
Fmt 6652
Sfmt 6201
E:\BILLS\H1780.IH
H1780
mstockstill on PROD1PC66 with BILLS
‘‘(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; 
‘‘(3) a requirement that the Board consider the 
efficiency of audit practices in its inspections con-
ducted under section 104; 
‘‘(4) specific alternative requirements for small-
er issuers that reflect— 
‘‘(A) the relative size and complexity of 
smaller issuers; and 
‘‘(B) the relative financial and manpower 
burdens placed on smaller issuers in testing and 
documenting internal controls, taking into ac-
count the interests of investors and other stake-
holders in smaller issuers; and 
‘‘(5) revised standards for independence by 
auditors to permit the rendering of internal control 
advice for resolution of internal control issues and 
related liability safe harbors for auditors providing 
such advice to smaller issuers. 
VerDate Aug 31 2005 
05:03 Apr 03, 2007
Jkt 059196
PO 00000
Frm 00003
Fmt 6652
Sfmt 6201
E:\BILLS\H1780.IH
H1780
mstockstill on PROD1PC66 with BILLS
‘‘(d) DEFINITION OF SMALLER ISSUER.—For pur-
poses of subsection (c), the term ‘smaller issuer’ means 
an issuer that meets any of the following conditions as 
of the end of its fiscal year: 
‘‘(1) the total market capitalization of the 
issuer is less than $700,000,000; 
‘‘(2) the issuer has fewer than 300 record and 
beneficial holders of voting and non-voting common 
equity; 
‘‘(3) the issuer has been subject to the require-
ments of sections 13(a) or 15(d) of the Securities 
Exchange Act of 1934 for a period of less than 
twelve calendar months; or 
‘‘(4) 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.’’. 
Æ 
VerDate Aug 31 2005 
05:03 Apr 03, 2007
Jkt 059196
PO 00000
Frm 00004
Fmt 6652
Sfmt 6301
E:\BILLS\H1780.IH
H1780
mstockstill on PROD1PC66 with BILLS