Smaller U.S. firms wouldn't have to begin yearly management checks of internal controls over financial reporting - adopted by Congress in 2002 - until fiscal years ending on or after Dec. 15, 2007, under the SEC proposal. The current deadline is July 15, 2007.

A requirement for firms' outside auditors to evaluate the controls would be deferred until fiscal years starting on or after Dec. 15, 2008, under the plan.

If the SEC proposal is adopted, smaller U.S. firms would only need to conduct a management assessment of internal controls in the first year, deferring involvement by auditors until the second year.

For non-U.S. firms, the SEC proposed only a one-year delay that would defer the internal-controls requirement until fiscal years starting on or after July 15, 2007, rather than July 15, 2006.

The SEC plan, which the agency issued Wednesday for a 30-day public comment period, comes amid complaints that the internal-controls requirements imposed by Congress as part of the Sarbanes-Oxley Act have been time-consuming and costly for larger firms already subject to them.

In a statement announcing the plan, SEC Chairman Christopher Cox said the proposed delays are part of the SEC's efforts to be "sensitive and responsive" to smaller public companies in the United States and foreign firms subject to the internal-controls requirements because their securities are sold in the United States.

Cox said the proposed delay in implementing the rules for some firms also gives regulators at the SEC and the Public Company Accounting Oversight Board more time to "redesign" the way the rules are implemented, making the job more efficient and cost-effective.

-- JUDITH BURNS (Dow Jones Newswires)