Greenwood Says More Needs to be Done on SOX Reform
WASHINGTON, D.C. (July 25, 2007) -- Jim Greenwood, president and CEO of the Biotechnology Industry Organization (BIO), released the following statement following a vote today by the U.S. Securities and Exchange Commission’s (SEC) to approve the Public Company Accounting Oversight Board's (PCAOB) proposed auditing reforms to the Sarbanes-Oxley Act (SOX). The proposal, referred to as Auditing Standard No. 5 (AS5), offers new rules for auditors for companies’ compliance with Section 404 of SOX. Many small businesses, particularly biotechnology companies, have suffered unintended consequences of the corporate governance bill.
“We are pleased to see that the SEC and PCAOB have listened to the voices of small businesses including many biotechnology companies, recognized the problems with the implementation of SOX Section 404, and taken steps to reform the often onerous compliance associated with SOX. We believe that AS5 provides some significant areas of improvement.
“However, we remain concerned that the final rules have removed any type of definition for what is a smaller company. Unfortunately, a lack of definition leaves auditors without an important tool that will help them determine the appropriate size and scope of an audit. With no objective criteria or definitions, the auditors are the judge and jury of what is a ‘smaller company.’ Auditors have both legal and economic incentives to treat companies with as high level of complexity as possible. As a result, the intended cost savings of these new rules may not be realized by many small businesses.
“It is critically important for agency and other policy leaders to seek a solution to this challenge so that biotech companies can spend more time and resources on their true mission of developing technologies that improve health care, expand our food supply and provide new sources of energy.”