Businesses with less than $125 million in revenue should be exempt from costly new financial control rules, an advisory panel to the Securities and Exchange Commission urged yesterday.

The recommendation, which awaits a vote next week from the entire Advisory Committee on Smaller Public Companies, comes as trade groups and auditors battle over the time-consuming rules, mandated by the 2002 Sarbanes-Oxley Act to help prevent fraud and accounting mistakes.

Yesterday, the nation's four largest accounting firms, striving to counter complaints about the rules' expense, released a survey reporting that average costs are expected to decline by 42 percent to $4.3 million this year for large companies. The cost to smaller companies will fall 39 percent to $900,000, the study said. Reviewing corporate financial controls has helped boost accounting firm revenue even as it heightened friction between auditors and their clients.

Corporate executives have criticized auditors for nitpicking and performing unnecessary work during the first round of reviews last year. The SEC and the Public Company Accounting Oversight Board, which oversees the work of audit firms, responded in May by pressing accountants to take a more common-sense approach.

In recent weeks, SEC members Cynthia A. Glassman and Paul S. Atkins have expressed concern in public speeches that audit firms still may be going too far. SEC Chairman Christopher Cox has not announced his position on the issue. A majority of the five-member SEC would have to approve any relaxing of the control reviews for small companies.

In recommendations issued yesterday, the advisory group said companies with market capitalization of $125 million and revenue less than $125 million should be exempt from the rules altogether. Companies with market capitalization of less than $750 million and revenue less than $250 million should be freed from employing independent auditors to attest to the strength of their financial controls, the group said.

The rules "drain the limited resources of small companies particularly hard," said Richard Brounstein of Financial Executives International, a trade group for corporate officials.

Marie Lee of AeA, a coalition of technology businesses, said she hoped regulators would act quickly on the recommendations, which she called "reasonable." The control rules are scheduled to take effect for small companies as early as July 15.

Union-backed pension funds and some industry experts say holding small and large companies to different sets of standards on corporate governance is a recipe for disaster. Lynn E. Turner, a former SEC chief accountant, has pointed out that publicly traded companies long have been required to put financial controls in place. The problem, he said, is that too few businesses devoted sufficient resources to them in the past -- making it more expensive to play catch-up now.

In a letter to regulators yesterday, the Big Four accounting firms -- Deloitte & Touche LLP, Ernst & Young LLP, KPMG LLP and PricewaterhouseCoopers LLP -- also argued that the control reviews are causing companies to be more efficient.