For my governmental source, I looked at a transcript from a meeting of the Committee for Small Businesses from the House of Representatives. The meeting happened on May 3, 2006 and was entitled “Sarbanes-Oxley Section 404: What I the proper balance between investor protection and capital formation for smaller public companies?”
Section 404 of SOX requires managers to approve all internal controls and require an internal auditor to sign off on the management’s assessment. This section of the law has become nearly synonymous with the name Sarbanes-Oxley, regardless of the entirety.
The costs to implement this section far exceeded expectation especially for small businesses, and the SEC admitted that it was not as important for small businesses to follow. (However, others have argued that it is small businesses that need the law the most.) The problem with these increased costs is the companies do not have as much capital to be innovative and grow. Because it particularly affects small companies, a large part of our country’s ingenuity is being stifled.
This committee-meeting transcript is a useful source for me because it raises many questions about the validity of the law as it pertains to small businesses. It offers many directions in which I can take my white paper as I continue to research the topic.