Our study evaluates a provision of Dodd-Frank which provided permanent exemption from Section 404b compliance to non-accelerated filers. Our results show that these small firms did not improve their reporting quality to the same extent as large firms implying that the Dodd-Frank exemption will probably serve to keep the reporting quality of the exempted firms at lower than achievable levels.

We also note that as part of the Dodd-Frank legislation, the SEC was given a mandate to investigate raising the Section 404b exemption requirements from $75 million to $250 million in market capitalization (Dodd Frank 2010). While the SEC eventually decided to leave the exemption criterion at $75 million, this matter is still considered to be an open topic (SEC 2011). Our study informs this ongoing debate.

For more information on this study, please contact

Anthony D. Holder, PhD, CPA

Assistant Professor, Department of Accounting - MS 103

University of Toledo

Toledo, OH 43606-3390

Email: Anthony.Holder@utoledo.edu

Web:    http://homepages.utoledo.edu/aholder4/

Phone: 1.419.530.2560

Fax: 1.419.530.2873 

Holder, A., K. Karim, and A. Robin. 2013. Was Dodd-Frank Justified in Exempting Small Firms from Section 404b Compliance? Accounting Horizons 27 (1): 1-22.

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