Rep. Nydia Velazquez, D-N.Y., said that the Securities and Exchange Commission and the Public Company Accounting Oversight Board, or PCAOB, must implement the internal-controls section of the law in a way that "does not hamper America's competitiveness." She said that "postponing the compliance deadlines for at least an additional year would allow us to make this determination."

The 2002 law requires company management to evaluate internal controls over financial reporting, subject to review by outside auditors. The SEC has delayed applying the rules to more than 6,000 small companies at least four times, most recently citing a need to make the rules more efficient. Under current policy, small public companies will begin submitting management reports in 2008, and the auditor reports in 2009.

SEC Chairman Christopher Cox said new SEC guidance for management and new PCAOB auditing standards that the SEC expects to approve this summer - sometime after a 21-day comment period - will help lower compliance costs. He said that, by phasing in compliance with the internal-controls audit standards for smaller public companies, regulators would gain a sense of how bigger companies fared before applying the internal-controls rules to smaller companies.

"If that doesn't turn out as we intend," Cox told the committee, "we can then consider an extension." In remarks later to reporters, Cox emphasized his optimism, saying "it is our plan that smaller public companies come into compliance in 2009," with rules requiring internal-controls audits by outside auditors.

A visibly testy Velazquez demanded to know how the SEC could be sure that costs would be reduced. "The cost of compliance - do you have it?" she said, repeating a question that dominated her remarks. "What was your answer to my question about the fact that you don't have the costs for compliance?"

Cox said the SEC's estimates were included in materials being submitted to the Office of Management and Budget either Tuesday or Wednesday. He said the SEC would share that information with the committee.

The frustration expressed by Velazquez reflected broader concerns among small-business advocates, who questioned whether phasing in compliance was the right approach. The SEC is operating under the assumption that the most costly part of internal-controls rules is for hiring outside auditors to evaluate internal controls.

But "the highest percentage of these costs is for management," said Hal Scott, a Harvard University professor who is co-chair of a blue-ribbon panel that has recommended scaling back securities regulations. "It's really no answer to tell us we're going to defer the auditing piece of this," he said.