The decision keeps these smaller companies on the hook for demonstrating that their financial statements and external reporting systems are controlled. No doubt, compliance requirements will deter many smaller companies from going public (which may not be a bad thing, by the way). For those already public, the cost of compliance is pure overhead and therefore provides an incentive to merge or go private. However, most of these companies are stuck: They will be unable to raise the funds to go private or find a suitable merger partner at a suitable price.
Ventana Research thinks it is even more important for smaller public companies to look for ways to address the root causes of inefficiencies in their finance processes (for example, manual systems, undocumented processes or excessive use of spreadsheets). In our experience, addressing such issues is likely to enhance a company's financial control structure and reduce the cost of Sarbanes-Oxley compliance.
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2006 Ventana Research