Nearly three-quarters of finance professionals participating in a recent poll said their efforts to comply with internal control reporting and auditing requirements could be more efficient.

As part of its Inside Talk Webinar series, the Institute of Management Accountants and Ajilon Finance Solutions asked 210 accountants about their readiness to comply with Sarbanes-Oxley Section 404(b). That is the requirement for public companies to have their assessment of internal control over financial reporting audited by an external auditor.

So far, non-accelerated filers have escaped the requirement through numerous delays, the most recent of which pushed the requirement out to June 2010. Now as part of its financial and regulatory reform measures, Congress is considering exempting them entirely.

Of the 210 accountants participating in the recent poll, one-third said their company is less than 25 percent complete in implementing Section 404. Inefficiencies were attributed to problems such as poor training and education in the area of processes and controls, lack of focus on project management and utilizing resources, and a “compliance at all cost” mentality that is focused on effectiveness but not efficiency.

At a recent conference of the American Institute of Certified Public Accountants, Elisse Walter, a commissioner for the Securities and Exchange Commission, said the SEC does not support an exemption for smaller companies. “The SEC supports applying 404(b) to smaller companies, particularly as it applies to the financial crisis we’ve seen,” she said. “But now it’s in the hands of Congress.”

The fact that smaller companies are still not ready is not a surprise, said Jim DeLoach, managing director at consulting firm Protiviti. He ticked off a list of eight action items for smaller companies to pursue to assure readiness with a June 2010 compliance requirement, “assuming Congress doesn’t take it away,” DeLoach said. “There is still a long, long way to go for Congress to take 404(b) off the table.”

The eight items include addressing the tone at the top set by management, establishing a top-down rather than bottom-up focus on assessing controls, focusing on risk, understanding the significance of management’s ability to override controls, recognizing the impact of having less formal documentation, addressing questions around segregation of duties, knowing technology controls, and addressing financial reporting competencies.

These are many of the same elements highlighted in guidance for smaller companies provided by the Public Company Accounting Oversight Board, said DeLoach.