Subject: File No. S7-06-03
From: Brandon B Wagner
Affiliation: University of Wisconsin- La Crosse Accounting and Finance Undergraduate

March 7, 2008

Nancy M. Morris, Secretary
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549-1090

RE: File Number S7-06-03, Proposed Rule: Internal Control over Financial Reporting in Exchange Act Periodic Reports on Non- accelerated Filers

Ms. Morris:

I am writing to you in regards to the further extension of the auditor attestation report for another year to the date of December 15, 2009 for non-accelerated filers. I believe that SOX section 404 is a very important stipulation that companies of all size should be in compliance with. The mandate of annual filing of internal control reports with the SEC is of utmost importance not only for the company itself, but also for the investors in those companies. The implementation of internal control reporting has significantly improved overall shareholder confidence, which is imperative to the capital market.

To begin, it is the usual corporate objective to maximize shareholder wealth. Section 404 of the Sarbanes Oxley Act has of course increased the operating costs of each firm it pertains to. This has had an impact on shareholders, especially that of small companies, in the form of reduced returns. It is my belief that it is an absolute necessity for every company, no matter the size, to incur the costs of implementing proper and effective internal control management consistent with SOX section 404. I think it is absurd that governances of small companies should be different from that of large companies based on the size of market capitalization. If a company is large enough to be listed on the stock exchange, then is it really all that small? We are talking a market capitalization of millions of dollars. There shouldnt be a listing or categorization of large or small in the first place when referring to the implementation of section 404.

At first glance, the cost of compliance of internal control management and evaluation with section 404 can look very costly. Recent reports have shown that companies have used information during compliance activities to improve its processes, reduce risks, and build a better overall business. As time progresses, these costs will come down and be cost effective for the company in the long run. As I stated earlier, it is a common corporate objective to maximize shareholder wealth. I suppose that shareholder approval of the further delay of the auditor attestation report could be a possible solution. After all, they are the ones investing in the company in the first place. However, I cant see how investors in a company would even want to be a shareholder in a company that wants to delay the verification that internal controls are where they need to be.

To get down to it, I dont believe that the auditor attestation report should be delayed a further year. I believe this in the sense that every company- large or small/ non-accelerated filers should be forced to comply with section 404. There needs to be a sense of uniformity in our capital market. Sarbanes Oxley was established six years ago. Companies have already had plenty of time for implementation and to raise funds if cost were a problem. Contrary to many beliefs, these costs have proven to be very attainable according to the statistics furnished by Robert Benoit of COSO.

It is important to shareholders that a company maintains integrity and validity in financial reporting. It is certainly feasible to state that a delay will lessen investor confidence since it will take even longer for the assurances provided by the attestation report on managements internal control over financial reporting (ICFR). I believe that these non-accelerated filers need to comply with section 404 like all large companies, and no delay should be permitted. An attestation report of the companys internal auditor on ICFR should be included on the face of the financial statements for fiscal years ending on or after December 15, 2008. Auditor attestation on ICFR will increase the odds that internal deficiencies will be identified. It is in the investors best interest that the assurance of company integrity be shown as soon as possible, even if it means the increase in costs of fully implementing section 404.

The deferral of the report would be contrary to the intentions that Sarbanes Oxley was established- to increase investor confidence in the financial reporting of corporations. The proposed deferral would be inefficient and ineffective in assuring investors of company integrity and confidence. The cost of completing the reports is necessary in increasing organizational governance that investors now seek in our capital markets. The shocking events that damaged companies in our economy such as WorldCom and Enron were from a result of insufficient and inefficient internal controls. It is the responsibility of the company to provide valid and reliable information to investors so they can make sound decisions in investments. It is also the responsibility of the company to provide assurance to its owner- the shareholders- to verify the internal controls are under solid management.

In conclusion, the costs incurred to submit auditor attestation reports in the financial statements are necessary costs and deserve no further delay in completing them. Delaying investor confidence is not a way to maximize shareholder wealth and should not be rendered. The high costs of the audit report may currently decrease returns to shareholders, but the increase in integrity will only increase the value of the company and therefore shareholder wealth in the long run.


Brandon Wagner
2009 Accounting and Finance Graduate
University of Wisconsin La Crosse