Marmann, McCrary & Associates, P.C. has announced a process to allow small and medium sized public companies to comply with Sarbanes-Oxley (SOX) 404 requirements at a reduced cost while maintaining an acceptable level of risk.

"Our experience with SOX 404 compliance with the accelerated filers leads us to believe there is a better and more efficient method," said Larry McCrary, partner in the firm. "We took our experience in 404 compliance with large companies and followed the guidance from the Public Company Accounting Oversight Board (PCAOB) to develop an innovative approach for medium to small companies. This 'Top Down Approach' (TDA) helps these companies that are much more vulnerable to the financial impact of SOX 404 compliance," McCrary said.

A May 16 PCAOB news release made specific recommendations regarding the use of a top down approach (TDA). The report recommended that auditors:

"use a top-down approach that begins with company-level controls, to identify for further testing only those accounts and processes that are, in fact, relevant to internal control over financial reporting, and use the risk assessment required by the standard to eliminate from further consideration those accounts that have only a remote likelihood of containing a material misstatement;"

Fred Marmann, managing partner of Marmann, McCrary & Associates, noted that many auditors of public companies have been slow to adopt the top down approach recommended by the PCAOB. "By using our TDA," Marmann said, "small and medium size companies can dramatically reduce the cost of compliance. What we have seen is that small companies are using similar methods for 404 compliance that they were using to safeguard company assets. The result is a much more labor-intensive process at the lower levels of the company and greatly inflated costs of compliance." Marmann noted that the largest companies are experiencing compliance costs of approximately .1% of revenues, while smaller companies may see costs as high as 2.5% of annual revenues.

"Our approach is an executive approach that integrates audits, financial reporting and financial controls. In addition, our wide ranging experience and direct communication with clients is helpful to executives trying to understand the SOX requirements and the responsibility associated with certification," Marmann said.

"We are convinced that our new process will provide significant benefits and cost savings to small and medium companies. Our TDA was developed to implement audit procedures that address the planning and effectiveness issues identified by the Board a few weeks ago," he said.

Marmann, McCrary
http://www.marmannmccrary.com