[joeag]

The quote:

Matt Taibbi from Rolling Stones reports:

Ostensibly, the law makes it easier for startup companies (particularly tech companies, whose lobbyists were a driving force behind passage of this law) attract capital by, among other things, exempting them from independent accounting requirements for up to five years after they first begin selling shares in the stock market.

Is just wrong. You still need audited financials to be a public company (current, plus 2 years prior to IPO instead of 3). I believe what changed is some of the Sarbox rules related to rotating auditors, etc. See http://www.orrick.com/fileupload/4624.htm for one leading law firm's analysis of the JOBS act.

(I am not affiliated with the firm)

There is certainly room to relax some of the regulations put on small public co's by Sarbox. That's part of the reason companies are listing on foreign exchanges, and let's be honest, you dont' see "fraud running amuck" on the London Stock Exchange do you?

I like 37 Signals approach to building products and many of their business philosophies but they seem to have a need to relentlessly attack any other way of creating a company or doing business. Not quite sure why.

[mapgrep]

Do you have anything other than "I believe what changed" - a memory you are uncertain of - to dispute the article? The doc you link does not mention auditors at all.

And for what it's worth, this NY Times article would seem to support the original Rolling Stone assertion:

"Under the JOBS bill, companies with up to $1 billion in annual revenue would be free to ignore — for their first five years as a public company — regulations that were put into place after the end of the dot-com bubble and the collapse of Enron. Among them are requirements to hire an independent outside auditor to attest to a company’s internal financial controls..." http://www.nytimes.com/2012/03/23/business/senate-passes-sta...

[joeag]

The link does in fact mention auditing but you have to go to the "Jobs Act Alert" linked on that page. I wanted to cite to the "Jobs Act Alert" link, but it's a PDF, so I thought it was easier to cite to html page containing the link.

Your citation to the NY Times only governs "a company's internal financial controls" - not it's financials or independent accounting requirements (which is essentially audited financials).

My original criticism of the Rolling Stone assertion as reproduced by quote in the 37Signals blog post was and is that companies are exempt from independent accounting requirements. That's supported in the information I cited.

[mapgrep]

What Rolling Stone wrote is that the JOBS act would "exempt them from independent accounting requirements for up to five years."

What the magazine was referring to is that auditors would no longer have to attest to a company's financial controls for financial reporting (mentioned in the Orrick PDF you intended to link http://www.orrick.com/fileupload/4619.pdf).

This means, for example, they would not bother to make sure revenue is being booked correctly, as explained here http://online.wsj.com/article/SB1000142405270230407200457732...

When Groupon recently had to restate (and slash) previously-reported revenue, this was due to weak internal controls, the same sorts of controls the JOBS act would exempt from being audited. http://online.wsj.com/article/SB1000142405270230402350457731...

So you really need an independent audit not just of the numbers but of the controls behind the numbers if your goal is to make sure investors get accurate financial information about a company.

Thus audits of financial controls are a key part of independent accounting.

The only change I'd make to Rolling Stone's original piece would be to revise to "exempt them from CERTAIN KEY independent accounting requirements for up to five years." But that's for clarity, not technical accuracy.

Taibbi is communicating an accurate idea - the JOBS act seriously weakens independent oversight of accounting for affected companies.