The US Securities and Exchange Commission announced that it intends to delay implementation of the auditor attestation requirement for smaller companies under Section 404 of the Sarbanes-Oxley Act, and that its professional staff has commenced a cost-benefit study of the measure.

The study will collect and analyze extensive “real world” cost and benefit data from a broad array of companies currently complying with Section 404 under newly-issued guidance for companies and auditors. The new guidance for management and the new auditing standard were intended to reduce the compliance costs of Section 404 while strengthening its focus on material controls, the SEC says. In addition to assessing the Section 404 cost reductions resulting from the commission’s recent actions, the final report also will inform any decision to improve the efficiency and effectiveness of Section 404 implementation.

In connection with the study, the commission unanimously proposed, the one-year extension of the auditor attestation requirement for smaller companies that SEC chairman, Christopher Cox, had previously announced in testimony before the House Small Business Committee in December 2007. Under the proposed extension, the requirements would apply to smaller public companies beginning with fiscal years ending on or after Dec. 15, 2009.

“The commission believes that strong investor protection and healthy capital formation go hand-in-hand,” said Cox. “The study will give us the opportunity to ensure that the investor protections of Section 404 are implemented in the way that Congress intended, and do not impose unnecessary or disproportionate burdens on smaller companies.”

To reduce Section 404 costs while preserving its benefits, the SEC last year issued new guidance to help companies focus their reviews on the internal control issues that matter most to investors.

The SEC’s Office of Economic Analysis will lead the cost-benefit study with assistance from the Office of the Chief Accountant and Division of Corporation Finance. Commission staff expects to complete the study by late summer or early fall.