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. In May, the SEC approved [JURIST report] new interpretive guidelines for Section 404, relaxing previous guidelines for smaller, public companies which critics have called inflexible, burdensome, and wasteful. 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. 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.
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