Not Everyone's Sore About Sarbanes-Oxley

Lora Bentley

In an article published May 16, Financial News Online writer Mark Cobley says, "Investment advisers speaking at a corporate governance in Paris yesterday gave a positive verdict to the U.S. Sarbanes-Oxley legislation..." Without reading further, my first thought was, "Well, if these are foreign investment advisers, of course they did. They agree with critics' assessment that Sarbox has made the U.S. less competitive, which is good for their markets."


But I shouldn't have been so hasty. Half of the advisers Cobley quotes in the piece work for U.S.-based companies, and they were lauding Sarbanes-Oxley. Glass Lewis and MCI Communications representatives indicated that Sarbox "gives shareholders powerful tools to combat fraud."


Only International Herald Tribune commentator and former Arthur Andersen auditor Jim Peterson brought pessimism to the table, pointing out that the already shaky audit industry -- built only on four major players -- won't survive another failure. He said,"When the next one goes, the entire structure falls down."

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May 29, 2008 2:20 AM Danny Lieberman Danny Lieberman  says:
I totally disagree.Sarbox is a fig leaf for big companies with a lot of money to spend.The average accountant has never been involved in a live fraud event and the just out of school, still wet behind the ears new grads that do Sarbox audits - barely knows what a real business looks like let alone a full blown forensic fraud investigation.The original Sarbox legislation didn't deal with SPC (special purpose companies) that were one of the root causes of Enron and considered today to be one of the root causes of the current sub prime crisis. How can the US deal with root causes of fraud by closing one eye and delegating the job of fraud investigation and mitigation to people who are not qualified for the task?Sarbox costs US companies over $100BN / year in services (the impact on IT spend is $18BN alone). Imagine if the US were to invest $120BN /year in green energy development instead of in big 5 billable hours? Reply
May 30, 2008 2:25 AM Chris Billington Chris Billington  says:
Sarbox is a CYA audit (Cover Your - well, you know). It is driven by checklists and is done to a formula. Because it is checklist driven, it is possible to use cheap, junior staff and derive a good profit. The firm I used to work for used Sarbox to survive downturns in other sectors.The system now means that if a fraud occurs, no one can get sued. The paperwork will prove that no one was responsible.The high profit margins which the partners need to drive their annual bonuses mean that there is no time any more for a decent investigation of things which appear a little suspicious. Audit Managers are still under the cosh not to upset clients, so provided all the bits of paper are signed, everyone is happy - oh except the shareholders when it goes down the tubes.In the UK, in the public sector, the Audit Commission is now firing its specialist technical IT auditors, preferring to send junior non-IT specialists to look at complex systems and - yes, you guessed it - do a checklist audit.Police officer to man in striped tee-shirt with mask on "Did you burgle that house ?"Man "No"Police Officer (as he ticks the box on the form) "Oh, that's all right then, off you go"Checklist completed, loot obtained, both parties depart content and satisfied...... Reply

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