Sarbox from the Eyes of an Accountant Turned Director

Lora Bentley

Lesley H. Howe has a unique perspective on Sarbanes-Oxley, largely because he spent more than 30 years in public accounting pre-Sarbox, and he has served on multiple corporate boards post-Sarbox. In an article posted Thursday at San Diego Source, Howe notes, "To say that SOX got off to a bad start is an understatement." I think we'd all agree.

 

As Howe points out, the legislation was enacted and companies and auditors were required to implement it with very little guidance or help. Doing so required much more time and money than anyone expected. The PCAOB told audit firms they were "too cozy" with their clients, so they stopped consulting and focused only on audits. The firms were also understaffed, so audit fees soared.

 

Six-plus years later, however, Sarbox compliance efforts have moved more toward business as usual. There is greatly improved guidance on implementation. Audit firms have gotten back to consultation as well as audits, and staff sizes are commensurate with the tasks they must complete. Competition for clients has reentered the equation as well, Howe says, so fees are more manageable.

 

Moreover, corporate directors -- particularly audit committee members, he says -- are better informed and not afraid to ask "probing questions." There are new independence and "financial literacy" requirements. Today's directors remain engaged in the governance process better than their predecessors did.

 

All in all, Howe says, "I'm not sure that the adoption of SOX was cost justified, but public company boards and their committees are better because of it."


 

There are some who would debate that point, but I think Howe makes it well. It should be made more often.



Add Comment      Leave a comment on this blog post
Sep 25, 2008 1:49 AM Kevin Kevin  says:
Having worked for both a retail mortgage company which was acquired by a bank last year which recently went into receivership by the Feds in July of 2008; I still think SOX is a failure when it comes to helping manage the business ethically. For all the IT governance and compliance we adhered to in our IT realm; "business still rules", and we failed on that front with some unethical and foolish business practices. SOX 404 is expensive to implement and the "compliance guys" seem to be the CEO's worst enemy. With the financial industry in such a disarray right now, it will be interesting to see what new measures and controls are foisted upon the applicable business sector. Reply

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