From: Romeo R. Dizon
Sent: March 22, 2006
Subject: File No. 265-23

To the Advisory Committee on Small Public Companies:

I would like to thank the Advisory Committee on Small Public Companies for their effort on the preparation of their proposed recommendations (namely III.P.1 and III.P.2) to modify the current Sarbanes-Oxley Act of 2002, Section 404 (SOX 404) requirement for the microcap and smallcap companies. I am a strong proponent for laws related to requiring effective internal controls over financial reporting for all public companies; however, I believe that such laws or requirements should only be made at costs that will not significantly drain a company’s resources, financial and or human.

The cost of complying with SOX 404 on small companies is overwhelming. I currently hold the position of Chief Compliance Officer/Director of Internal Audit for a small publicly-traded software company. My company has incurred approximately 5% and 3% of total revenue and 40% and 84% of net income, in 2004 and 2005, respectively, on SOX 404-related consulting, accounting and audit fees in 2004 and 2005, respectively. These amounts are definitely not a chunk of change for a company our size.

In addition to the “hard” costs mentioned above, we have also incurred “soft” costs of approximately 8% and 13% of net income in 2004 and 2005, respectively. These “soft” costs represent the approximate total salaries and related costs of the applicable employees who spent time working on our company’s SOX 404 project for the two years mentioned above.

Although costs is the primary reason for needing to change the current SOX 404 compliance requirement, however, another factor that is troubling is the fact that in the process of attempting to report “fairly” stated financial statements, a company’s management can no longer seek the professional and expert advice from their independent accountants on issues regarding accounting treatment of transactions due to the fact that to do so would impair the auditor’s independence. Unlike in the “pre-SOX 404 days, our independent accountants were quick to advise us on the accounting treatment of transactions in order to present our financials fairly. Now during the “post-SOX 404 days, my company’s management seeks such advice when needed, with other accounting/consulting firms, thereby incurring additional costs.

Lastly, at this point it appears that the only ones who are benefiting from SOX 404 are the accounting firms themselves. It is good to hear that their business has increased as well, but to hear that CPA firms are “firing” their smaller-sized clients is hard to believe. I am not aware of the actual numbers, but numerous microcap and smallcap companies, such as my company, were “fired” by our former independent accounting firm, not because of any disagreements. I attribute the “firing” to a resource/billable revenue issue; their staff could be at bigger clients generating higher billable revenues. Where are the days when CPA firms were cutting billing rates in competition with other firms just to earn a company’s $20,000 annual business?

Best Regards,

Romeo R. Dizon
InterVideo, Inc., Chief Compliance Officer/Director of Internal Audit