Hawk Corp Incident and SME Opportunity

Did Hawk Fly Too High?

A formal investigation by the SEC appears to question whether the auto-parts maker was actually small enough to delay compliance with Section 404 of Sarbanes-Oxley. According to a filing issued Wednesday by Hawk, the SEC is apparently exploring whether or not various stock transactions might have affected the company’s claim that it qualified as a non-accelerated filer.

By SEC, companies with market cap of less than $75M were given additional time — and two extensions — to comply with Section 404 of the Sarbanes-Oxley Act. This story amazed me that how far a company will go in order to delay the compliance of SOX.

The latest SEC rule, companies with market cap of $75M (majority of public companies) must begin complying with the management attestation on internal controls at the end of this year 2007, and the auditor attestations at the end of 2008.

I can imagine how much pressure for CFOs and CEOs of SMEs. Most large GRC applications still target large cap companies and with the price at million $ range. Shouldn’t we start GRC for SME now? or GRC on demand? I definitely can see how small GRC players can play this niche role first.



One Response to “Hawk Corp Incident and SME Opportunity”

  1. Bob Benoit Says:

    You are correct that SMEs (also called smaller public companies) must comply this year.

    And you are also correct that they should start now. Accelerated filers started their 2007 compliance months ago. And SMEs will need to go through much more remediation than what one might expect. The earlier the better.

    There is a free research report Lord & Benoit published called the “10 Threats to SOX Compliance for Smaller Public Companies” that should be helpful in helping SMEs get started. Go to http://www.section404 in the research section.

    With regards to SOX requirements, you will find an example of a cost effective, top-down, risk based framework, (also located on the SEC and PCAOB websites) also free of charge at: http://www.section404.org/pdf/15_sec_concept_release.pdf

    Lord & Benoit’s research can be a great starting point for understanding SME requirements. The research has been quoted by all the Big 4 firms, SEC, PCAOB, Wall Street Journal and over 100 trade journals.

    Please download this free research at http://www.section404.org (in the research section of the site).

    With regards to exorbitant costs, Lord & Benoit pioneered a cost effective process called Virtual SOX which allows for remote compliance without sacrificing quality or effectiveness. Between this and COSO for Smaller Public Companies, Lord & Benoit guarantees that compliance costs would be anywhere from 30% – 50% less expensive than what you would pay to other compliance firms who are not focused on smaller public companies.

    And finally management disruption is the lowest because Lord & Benoit engagements are well-planned, right sized and focused on important controls as reiternated in the newest PCAOB Auditing Standard #5. This may not seem important to you now, but some of you know what we mean.

    Lord & Benoit has a proven track record of being cost effective and credible – with minimal management disruption.

    Bob Benoit, the President of Lord & Benoit serves on both the COSO Task Force and AICPA Boards.

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