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

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

SOX 404 cost concerns center on audit fees, since a company's outside auditors have to attest to the effectiveness of its controls. A paper earlier this year by R. Mithu Dey of the Rochester Institute of Technology and Mary Sullivan of George Washington University found that companies that began complying with SOX 404 in 2007 saw a median increase of 37% in their audit fees. The authors say there is no statistically significant evidence that Auditing Standard No. 5, introduced in 2006 to contain the cost of SOX 404 audits, had an effect on costs in 2007.