SEC to Advise Firms on Financial Disclosures

The Securities and Exchange Commission said its guidelines for complying with the Sarbanes-Oxley law would include advice for managers on how to spot problems with company procedures in preparing financial statements and what kinds of documentation to provide.

The SEC’s announcement Tuesday kicks off a rule-writing process expected to last for at least six months. In addition to sketching out broad themes that the agency will cover in the guidelines, regulators asked the public for input about what they should say.

The SEC is under pressure from business groups such as the U.S. Chamber of Commerce and members of Congress to help ease the costs to companies of complying with audit requirements spelled out in a part of the 2002 law known as Section 404.

“Our goal is to develop practical guidance for companies to help improve the reliability of financial reporting and to make Section 404 implementation more efficient and cost-effective for investors,” SEC Chairman Christopher Cox said in a statement.

At a public hearing May 10, the SEC heard from executives, academics and other experts on companies’ costs of complying with Section 404. The agency also heard suggestions that it specify what company managers should do to assess their financial and accounting processes.

The SEC’s statement is a comprehensive listing of problems facing companies because of the Sarbanes-Oxley law, said Herbert Wander, a Chicago securities attorney who chaired an SEC advisory panel on costs borne by small companies.