[JURIST] The US Securities and Exchange Commission (SEC) [official website] voted Wednesday to approve [press release] new interpretive guidelines for Section 404 of the Sarbanes-Oxley Act of 2002 [PDF text; SEC materials], relaxing previous guidelines which critics have called inflexible, burdensome, and wasteful. Section 404 requires public companies to continually evaluate the internal controls they have in place to ensure that external auditors provide accurate financial reports to investors. Accounting firms, which have profited from tough control standards, have supported stricter guidelines, while public corporations have argued that they impose too high of a burden on small companies. The relaxed guidelines will apply to businesses with a market value of under $75 million, and will focus on areas more prone to potential fraud.

US Treasury Secretary Henry Paulson said last November that Sarbanes-Oxley raised the cost of doing business in America [transcript; Bloomberg report] and cited the decline of stock transactions since 2002 as an example of its impact. A report [PDF text; JURIST report] released in May 2006 by the Government Accountability Office (GAO) [official website] found that many small business have gone private [JURIST report] to avoid the costs of compliance. Other officials, such as then New York state attorney general and current Governor Eliot Spitzer (D), have warned against easing the standards [JURIST report], saying that many of the efforts to soften corporate accountability reforms are being pushed by the same corporations that employed questionable accounting and business practices before Sarbanes-Oxley was passed. The New York Times has more.