Has Sarbanes-Oxley achieved it's goal?

[spidey07]

With all the cries of "we need more regulation!" let's look at the knee jerk that was sarbox. I'm going off strictly by memory so corrections are very much welcome. At the time there were auditing scandals, the entire auditing industry was going down, the very people who were entrusted with watching the hen house were actually actively involved in robbing it or hiding behavior.

So the auditing industry was in shambles. I don't remember the year, it was after the Enron scandal, real early 2000s sounds familiar. The solution? MANDATE by FEDERAL LAW that audits must be performed regularly. Now talk about a law that created a demand for a failing industry.

Yes, I know about the other aspects "executives face penalties for not being compliant", but what was the real goal of SarBox and has it been met? The promise was "economic scandal will be prevented".

And yet here we are. So the questions remain - was this wide sweeping regulation successful in meeting it's goals (somebody let me know what they were again) and is more regulation always the answer if everytime it's tried it seems to fail?

 

[Zorkorist]

No.

And it won't ever be.

Can you imagine political Generals trying to do business?

-John

 

[dfuze]

I doubt it will ever achieve it's goal. No matter the intentions of a law/regulation there will always be some sort of loop hole that no one thought of before that this missed and will be exploited.

 

[GuitarDaddy]

If you haven't heard the SCOTUS took all the teeth out of SARBOX

 

[spidey07]

I doubt it will ever achieve it's goal. No matter the intentions of a law/regulation there will always be some sort of loop hole that no one thought of before that this missed and will be exploited.

Never underestimate the power of capitalism. Business will find a way to negotiate around the new rules. It's basic human nature.

 

[Jhhnn]

Auditing firms weren't failing, they were just subject to the same sort of capture as banking regulators, oil industry overseers, ratings agency and some others...

The ones who lost business yet retained integrity survived, while others, like Arthur Andersen, ceased to exist.

SOX never really addressed the structural issues involved in the Enron deception, off-balance partnerships & etc, which is why we had the housing bubble deception, too...

 

[Hacp]

Sarbones did in fact achieve its goal. Its goal was to give a huge handout to the big accounting firms. That worked mighty well.

 

[BoomerD]

Yes it did...it gave the sheep some (false) hope that the system worked...and that it was safe to invest.

Of course, the reality is that the system doesn't work...except for the big players...never the little people on the bottom.

 

[spidey07]

Sarbones did in fact achieve its goal. Its goal was to give a huge handout to the big accounting firms. That worked mighty well.

Yep. Look at the guys that wrote it. Talk about creating demand.

 

[rpanic]

All it has done is waste 5 minutes of my life every year with a mandatory dumb corporate quiz that I get emailed to take at work that nobody gives a shit about.

 

[Dr. Detroit]

Corporate accountability is good and while SOX is not the be all end all it does do a good job of making the officers of the Company responsible for intentional errors and the assurance internal controls are working.

SOX forced the officers to be more involved in the financial record keeping - not a bad thing at all.

 

[chucky2]

SOX is a F'ing disaster in respect to getting things accomplished efficiently from an IT perspective. If there is an IT God, then the MF'ers who created SOX will all burn in Lawyer and Accounting Hell.

If I could meet just one person who was involved with SOX being made law, I'd stab them with a rusty paper clip in the genitals until they were dead.

That is all.

Chuck

 

[mwtgg]

If you haven't heard the SCOTUS took all the teeth out of SARBOX

They made the PCAOB members subject to presidential authority. Yeah, way to neuter the law!

 

[NeoV]

this is a funny thread - Spidey doesn't seem to have much of a clue as to what SOX actually is or was intended to do, but at the most basic level of the post, he's correct - it is, at best, a highly flawed, over-reaching, piece of crap that was written by the very people and organizations that it benefits most.

 

[zsdersw]

SOX is a F'ing disaster in respect to getting things accomplished efficiently from an IT perspective.

Amen.

 

[Fern]

With all the cries of "we need more regulation!" let's look at the knee jerk that was sarbox. I'm going off strictly by memory so corrections are very much welcome. At the time there were auditing scandals, the entire auditing industry was going down, the very people who were entrusted with watching the hen house were actually actively involved in robbing it or hiding behavior.

So the auditing industry was in shambles. I don't remember the year, it was after the Enron scandal, real early 2000s sounds familiar. The solution? MANDATE by FEDERAL LAW that audits must be performed regularly. Now talk about a law that created a demand for a failing industry.

Yes, I know about the other aspects "executives face penalties for not being compliant", but what was the real goal of SarBox and has it been met? The promise was "economic scandal will be prevented".

And yet here we are. So the questions remain - was this wide sweeping regulation successful in meeting it's goals (somebody let me know what they were again) and is more regulation always the answer if everytime it's tried it seems to fail?

IMO, SOX was ar best a mixed bag.

I believe it substantially led to the so-called financial crisis in 2007/2008 and the housing bubble bursting.

The provision requiring mark-to-market on CDO's/MBS etc even when they were intended to be held long term resulted in billions of 'paper losses'. This devastated the balance sheets of the big banks, which in turn crippled their lending ability.

CDO/MBS were sold for pennies on the dollar, but clearly mortgages, and the homes backing them, have not declined by 99%. Introducing artificial losses pervasely throughout banking/financial/home syatem has no merit and results in awful consequences.

SOX also devastated the IPO/financial sector in the USA. We don't need to be pushing any more jobs offseas. SOX is estimated to add millions of $'s to bringing a new company into the stock market (IPO's etc), so this business has moved to the UK and German exchanges.

It also resulted in much regulatory costs in forms of more (CPA) auditing steps required. The benefit of this is dubious.

It has, however, required that senior execs take legal responsibility for their company's representations to the outside auditors. Closing that loophole where execs claimed they 'didn't know' was a good thing.

The so-called "auditing scandals" were MSM driven BS. The Authur Anderson case went to the SCOTUS and they were found to have done nothing wrong. Enron's lawyers/financial types knew the accounting rules and took advantage of a loophole in GAAP (foreign partnerships exempt from mandatory inclusion in consolidated financial statements); that loophole should have been closed. As usual Congress went too far and we've suffered the inevitable unexpected consequences.

Fern

 

[Fern]

Auditing firms weren't failing, they were just subject to the same sort of capture as banking regulators, oil industry overseers, ratings agency and some others...

The ones who lost business yet retained integrity survived, while others, like Arthur Andersen, ceased to exist.

SOX never really addressed the structural issues involved in the Enron deception, off-balance partnerships & etc, which is why we had the housing bubble deception, too...

Not really Jhhnn.

Auditing firms don't make up the (GAAP) rules that they must follow in performing their audits.

The FASB makes up these rules. Were they unduly influenced by the banking industry? IDK.

But it's quite likely that the rule allowing foreign partnerships to NOT be consolidated in the company's financials originally had good reason. (BTW: they are on the BS sheet, but only a single standalone line reflecting only the summations of the company's historical investment in that partnership, and not the details of the partnership's own financial particulars.)

I think it more likely that the Enron lawyers etc figured out a way to use that loophole in a new and unintended manner instead of any nefarious action on AA's part. These things, newly found loopholes, pop up from time-to-time; that's one reason why tax law is continually modified/updated.

Fern

 

[Capt Caveman]

Corporate accountability is good and while SOX is not the be all end all it does do a good job of making the officers of the Company responsible for intentional errors and the assurance internal controls are working.

SOX forced the officers to be more involved in the financial record keeping - not a bad thing at all.

Agree. As someone who has had to create SOX policies, documentation, etc. for my IT dept prior to my company going public it definitely creates accountability, segregation of duties, forces documenting processes, etc.

It does also create a lot of additional work, can slow down some business processes and as some have mentioned, created it's own industry.

But overall, there are more pros and cons.

 

[Hayabusa Rider]

As far as regulation goes it's fairly certain that the prior administration came down hard on anyone who actually called businesses on wrongdoing. It's one thing to blame officials who were incompetent, but it's another when the net effect is to get crucified by a Presidential Administration for doing your job. No official wants to piss off a sitting President. It's suicide and your findings will never see the light of day.

 

[Pulsar]

It has, however, required that senior execs take legal responsibility for their company's representations to the outside auditors. Closing that loophole where execs claimed they 'didn't know' was a good thing.

Fern

I have to say no to this. I can't speak for other companies, but ours simply shoved the crap down hill. Every year, every engineer down to the lowest peon needs to certify that THEY are following Sarbanes. We got retention record periods on everything you can imagine, and there's probably 1 person in this end of the company who actually knows what they're all supposed to be.

I do my best every year to answer the questions carefully and correctly, but it's so convoluted, confusing, and generally worthless that it's a huge check-the-box CYA for most people. Who is going to get fired? Not the upper management.

 

[QuantumPion]

One of the goofy provisions of SO is computer security. As a consequence, our passwords at work have to be 16+ characters long, and contain capital letters, special characters, spaces, etc, with nothing resembling a dictionary word. Also they must be changed every 30 days, and cannot be within 8 characters of any similar password.

As a result, everyone makes a random password and writes it down in a stick note and leaves it in their desk, because no one can remember their password with such ridiculous rules. Hooray for government!

 

[RedCOMET]

We just talked about SOX in my Financial Accounting class last week. Sadly though, we didn't discuss it in serious detail. Thankfully the AT P & N Gods have heard my prays and delivered me to this thread.