William Donaldson, Chairman of the Securities and Exchange Commission, has told Congress last week that a wide roll-back of the Sarbane-Oxley Act was "unjustified". He was responding to questioning about the cost of compliance with Section 404 of the Act.

Mr Donaldson did however say that regulators "must be sensitive to the need to recalibrate and adjust our rules and guidance to avoid unnecessary costs or unintended consequences."

Section 404 is the most contentious part of the Sarbanes-Oxley Act. Study after study has shown auditing and consulting costs soaring, as firms seek compliance.

The section requires companies not only to internal controls over to financial reporting, but also to attest to their effectiveness in the annual results.

William McDonough, Chairman of the Public Company Accounting Oversight Board (PCAOB) backed his argument by quoting a survey by Oversight Systems, which found 79% of 222 financial executives said their companies had stronger controls because of 404.

Mr. McDonough acknowledged the cost of compliance, saying, "There have been concerns about the cost of those enhancements and about whether those enhancements create counterproductive, unintended consequences."

The two regulators appeared before the House Financial Services Committee, chaired by Rep. Michael Oxley, R-Ohio.

(By the way, Michael Oxley is the Oxley in Sarbanes-Oxley.

Rep. Oxley also acknowledged the costs, however he believes the costs are outweighed by the benefits, "We may have heard a complaint or two about the costs, but the benefits are undisputed." Compliance costs for Section 404 have been higher than expected, especially for smaller companies"

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