Do small companies need a 404 audit?

• Author: Marshall, Jeffrey
• Position: Regulation - Generally accepted accounting principles

Sarbanes-Oxley compliance isn't a bad thing, contends Cromwell Coulson. In fact, virtually everything about the law is positive except its added costs, says Coulson, president and CEO of Pink Sheets LLC, the leading provider of pricing and financial information for the U.S. over-the-counter securities markets.

"It's the kind of regulation where they're saying that every house should be painted in the neighborhood, but the painter decides when the house is done," Coulson said just prior to testifying earlier this summer about the law before the House Government Reform Subcommittee on Regulatory Affairs.

"By removing the vendor-client testimony from the audit process, accounting costs are no longer within the audit client's control," Coulson said in his testimony. "This has the unfortunate result of providing an incentive on the part of the auditor to conduct unnecessary procedures, with resulting runaway costs."

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He added in an interview that "for investor information, the audit is not what truly matters for small companies. SOX [Sarbanes-Oxley] doesn't handle the kind of information you...