US agrees to ease Sarbanes-Oxley accounting rules

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After several years of lobbying, Wall Street appears on the brink of a victory in its campaign to water down provisions of the hated Sarbanes-Oxley law that regulates company accounts.

The legislation, introduced in 2002 in the wake of the Enron and WorldCom scandals, has led to a big increase in the costs of running a public company, and been blamed for driving foreign companies away from the New York Stock Exchange.

Regulators are expected to unveil rule changes that will cut the number of checks demanded by company auditors.

Under a provision of the SarbOx laws, companies must list the controls they have in place to prevent fraud and ensure accurate accounts. The list might span everything from revenue recognition policies to who has keys to rooms were financial data is kept. Companies complain that compiling the list, and then having it verified by auditors, has added millions of dollars to the cost of maintaining a stock market listing.

The Securities and Exchange Commission, Wall Street's watchdog, and the Public Companies Accounting Oversight Board (PCAOB), set up under the SarbOx legislation, are expected to announce next month that they will interpret the requirements of the law more loosely.

Small companies, for whom the costs of SarbOx compliance are relatively more onerous, could get additional concessions - a key demand of the SEC chairman, Christopher Cox, in a letter to the PCAOB this week.

The Sarbanes-Oxley legislation, named after the two politicians who pushed it through Congress, introduced new measures to try to restore public confidence in corporate America, which was being sapped by the frauds at Enron, WorldCom, Tyco and others. Under the laws, directors were required to accept legal responsibility for the accuracy of the accounts, and there were new rules to prevent conflicts of interest within auditors.

Wall Street has argued that the legislation is partly responsible for the drop in the numbers of foreign listings in New York, and for the growing number of companies going private.

A new, more relaxed ruling on the interpretation of the law is a significant victory for the lobbying campaign led by John Thain, chief executive of the New York Stock Exchange. However, many businesses want changes to the law itself, and are examining whether the new Democrat-controlled Congress may be willing to revisit the legislation.