In recognition of the high cost of compliance with its Section 404b—Auditor Certification of Internal Controls—the Sarbanes-Oxley Act of 2002 (SOX) provided temporary exemption to small firms (called non-accelerated filers, typically with market capitalization of less than $75 million). This temporary exemption was later made permanent by the Dodd-Frank Wall Street Reform and Consumer Protection Act (2010). Our study estimates the opportunity cost of this exemption, that is, the reporting quality gains that would have been achieved by non-accelerated filers if exemption were not granted. We do so by using a “difference in differences approach”: We compare the effect of SOX on the reporting quality of accelerated filers with the effect of SOX on non-accelerated filers (identifying the two groups using market capitalization thresholds). We measure reporting quality principally by using earnings management and accrual quality measures. We detect a significant deterioration in reporting quality for non-accelerated filers but not for accelerated filers. The result is invariant to whether we compare non-accelerated filers with all accelerated filers or only with small accelerated filers. Our findings suggest a significant opportunity cost for the exemption. Although the consideration of the cost of Section 404b compliance is outside the scope of our study, our result concerning the opportunity cost suggests that it may have been premature to grant permanent exemption to the non-accelerated filers. This result is especially important considering current discussions to grant Section 404b exemption to even larger firms (up to a market capitalization of $500 million).