The U.S. Securities and Exchange Commission is postponing internal control reporting requirements for smaller companies.

The SEC is adopting an extension proposed in August to further postpone the date by which smaller public companies must comply with the internal control reporting requirements mandated by Section 404 of the Sarbanes-Oxley Act of 2002.

“Previously, non-accelerated filers were scheduled to begin including both management’s assessment and an auditor’s attestation to management’s assessment on the effectiveness of the filers’ internal control over financial reporting in their annual reports for fiscal years ending on or after July 15, 2007,” it notes. “The commission is extending the date so that a non-accelerated filer will provide management’s assessment regarding internal control over financial reporting in its annual reports for fiscal years ending on or after December 15, 2007.”

The SEC is also extending the date by which a non-accelerated filer must begin to comply with the auditor attestation requirement. Due to the extension, non-accelerated filers must begin to comply in their annual reports filed for fiscal years ending on or after Dec. 15, 2008.

“Deferred implementation of the auditor’s attestation report requirement will provide smaller public companies and their auditors with additional time to consider the anticipated revisions to Auditing Standard No. 2, as well as any implementation guidance that the PCAOB plans to issue for auditors of smaller companies,” it explains. “The extension also should enable management of smaller public companies to focus on the internal assessment process during the first year of compliance with the internal control reporting provisions.”

“Smaller public companies, both foreign and domestic, along with newly public companies are all vital participants in the U.S. capital markets. The extensions and transition relief announced today reflect the commission’s understanding of the special burdens that Section 404 may pose for these issuers,” said John White, director of the Division of Corporation Finance at the SEC.

“Section 404 plays a critical role for investors and our markets by enhancing the reliability of financial reporting but its implementation needs to be more efficient and cost-effective for the companies that must comply with it,” White added. “The measures the commission has adopted, along with other efforts underway at the commission and at the Public Company Accounting Oversight Board, will advance those goals and should therefore also reduce the costs and increase the attractiveness of participating in our capital markets for a variety of companies.”