Recently, in connection with the Securities and Exchange Commission’s consideration of proposed amendments to the definition of “smaller reporting company,” the Commission had an opportunity to consider including in the adopting release an exemption from the Section 404(b) auditor attestation. The Commission deferred a decision on the Section 404(b) auditor attestation. A number of the Commissioners noted that it would be helpful to have the benefit of statistical data regarding the costs associated with the Section 404(b) process and observed that the commenters on the SRC amendments proposed a few years ago included anecdotal commentary on the burdens imposed by Section 404(b) auditor attestation requirements. Congress also has considered a number of legislative measures that would provide for exemptions for different issuers from the Section 404(b) auditor attestation requirement. For example, one measure would provide an exemption for low revenue issuers. A different legislative proposal would extend the period during which emerging growth issuers are exempt from the requirement from five years to ten years. Against this backdrop, authors Weili Ge, Allison Koester, and Sarah McVay attempt to quantify the benefits and costs of exempting smaller firms from the auditor attestation requirements and under Section 404(b). In a paper titled “Benefits and Costs of Sarbanes-Oxley Section 404(b) Exemption: Evidence from Small Firms’ Internal Control Disclosures,” the authors compare the relative increase in audit fees of exempt firms and non-exempt firms from 2003 to 2014. The authors quantify the benefit of the exemption as a savings of $388 million in Section 404(b)-related audit fee savings for the 5,302 exempt firms sampled. The authors then consider internal control misreporting, which critics of the exemption point to as the principal concern. The authors conclude approximately 9.3 percent of the exempt firms that disclose effective internal controls actually have ineffective internal controls. These are, according the authors, evidence of misreporting. Section 404(b) compliance lowers misreporting of internal controls from 9.3 percent to 5.8 percent. The authors also assess the costs of internal control misreporting attributed to the Section 404(b) exemption, lower operating performance due to non-remediation and market values that fail to reflect a firm’s underlying internal control status by looking at changes in future earnings and future stock returns for suspected internal control misreporting. The authors estimate that the costs of a Section 404(b) exemption for suspected internal control misreporting as $719 million in lower operating performance due to non-remediation and $935 million delay in aggregate market value decline due to the failure to disclose ineffective internal controls.