According to the Washington Post, the SEC is thinking about delaying some of their other corporate reforms because of the effect Sarbanes-Oxley is having. The documentation, testing, and evaluation of internal controls is costing more money and taking more time than predicted. Everything does, doesn’t it? Among the initiatives that may be delayed are treating stock options as an expense, another dubious reform.
As previously noted, the Chicago Boyz are not big fans of Sarbanes-Oxley. Maybe the only thing worse than shouting “Fire!” in a crowded theater is shouting “Don’t just stand there, do something!” in Congress.
As an auditor, I can only say “Hear! Hear!” This also applies to new audit standards that apply to all audit clients, not only public companies. Try explaining to your privately-owned corporate clients why their audit fees are going up while they are still recovering from the recession and the aftereffects of 9/11.
Actually Karen, as an auditor, you should be saying “hip hip, horaaayyyy…” Sarbox is a tremendous addition to the cost of doing business, which in effect is a tremendous transfer of wealth to the accounting profession. Which ultimately, if you remain an auditor, will provide years of steady employment with increasing salaries. It’s the biggest boon to the profession since the Securities Act of 1933.
Does anybody else find it ironic that the Congress of the United States took it upon themselves to fix the shoddy accounting of others?
Obviously leading by example was not considered an option.
To incognito’s broken windows point, we can add all the great innovation it sparked in web portal, document management and collaboration software.
Matya no baka
Incognito, that’s true if you do audits of public companies, which I don’t and have no plans of starting. What I do have are a host of clients who don’t think they should have to pay additional audit fees because of those idiots in Washington and New York. And worse, these clients can very well decide that they are not receiving any additional value for these higher audit fees. Except for those clients where audits are required by some third party, they could very well tell me to take a hike or reduce their level of service to lower their fees, yet give them some assurance. This hasn’t happened yet but it would not surprise me.
D Spear:
My thoughts exactly. As I was watching various Congress critters pontificate during the hearings, it was all I could do not to laugh hysterically. How many times has the GAO had to pull out of a Federal agency, declaring it “unauditable”. Probably more than we really want to know, it would be too depressing.
Karen, fair enough. I agree with you in particular with regards to small public companies. I recently left PwC, and the partners there were practically salivating over Sarbox. I also took part in Sarbox compliance engagements for 2 large public clients of ours. Suffice to say, Sarbox is a huge gobbler of time and resources for both accountants and clients. Not to mention boring boring boring for all involved. The standard Sarbox package from the Big 4 runs in the range of $250k to $500k. Obviously the bigger the company, the higher the fees. If you’re a Fortune 500, it’s pocket change. But if your company is barely profitable, half a million becomes night and day. My problem with Sarbox is that for all this time and effort spent, you aren’t really giving investors any more transparency.