On May 9, the Securities and Exchange Commission voted to propose a plan that would lessen the audit requirements for public companies that earned under $100 million in annual revenue. Smaller reporting companies (SRC) would not be required to obtain an attestation of their internal controls.
The SEC press release issued these details about the proposed amendments:
- Exclude from the accelerated and large accelerated filer definitions an issuer that is eligible to be an SRC and had annual revenues of less than $100 million in the most recent fiscal year for which audited financial statements are available;
- Increases the public float transition thresholds for accelerated and large accelerated filers becoming a non-accelerated filer to $60 million from $50 million and for exiting large accelerated filer status to $560 million from $500 million; and
- Add a revenue test to the transition thresholds for exiting both accelerated and large accelerated filer status.
These new proposed amendments are intended to clarify what is believed to be a contradiction created by the JOBS Act of 2012. The JOBS Act of 2012 raised the capital raise limits for SRC’s, but under the current legislation in place, a company could technically be an SRC as well as an accelerated filer. This new criteria removes this divide and aims to maintain protections for investors of these companies.
The new proposed amendments also emphasize the need for maintaining effective internal controls over financial reporting. Companies that qualify under the accelerated filer status should still maintain consistent and frequent reporting of their financial standing, despite the lessened cost requirements for the audit process. Company CEOs and CFOs are still required to certify their internal controls under the new amendments, and failure to adhere to the requirements can lead to damaging circumstances for your company.