March 20, 2007
Let's not go crazy with "Risk and Cost Focus with a Fear Chaser"
While I totally believe in the Sarbanes-Oxley legislation, I am concerned about a trend that this legislation has brought on in US businesses.
The legislation was meant to bring transparency to financial reporting and to focus on the quality of financial reporting. This was a good goal. This goal seems to have been hijacked by over zealous Big Four accounting firms. They were so Draconian in their approach to audits that they made this legislation about fear and busy work. They cared little for the true spirit of the legislation - report fairly and accurately to the investing public.
The reporting analytical framework used by most US registrants is called COSO (Committee of Sponsoring Organizations). There are essentially two frameworks, both centering around a "Risk Based" approach to internal control over financial reporting.
This is a good thing if it is not taken too far. It is good to analyze the risk to an objective and consider the risks of errors in fraud in financial reporting. It is good to analyze risk in business.
But let us not forget that American innovation and business was founded on taking risks. Not all risks can be mitigated. Not all of them should be.
Risk has become the modern day "boogie man". We fear the risks. One company's risk is another's opportunity.
Let's keep risk in focus. Let's not make it the total focus of business and fear the Big Four and the SEC so much that revenue suffers. Then you really have risk - the risk of going out of business because you were too risk averse.
Let's not become a nation of businesses, with only a "Risk and Cost Focus, with a Fear Chaser". Let's remember where we came from and keep this in perspective. Risk is to be analyzed and dealt with but it should not rule our worlds.
The Big Four perform a service, let's not let them dictate good entrepreneurial business practices. That is not their job nor their expertise. That is the job of optimistic CEO's who have to "Take the Hill" when they see opportunity.
If your company has to comply with SOX 404 or MI 52-109, and wants to do it in a sensible and cost effective way, contact http://www.issuescentral.com/ for more information on Compliance Playbook® for companies based outside of Canada. For Canadian based companies, see http://www.compliancepartner.ca/ for more information on Compliance Partner™ from Thomson Carswell.
The legislation was meant to bring transparency to financial reporting and to focus on the quality of financial reporting. This was a good goal. This goal seems to have been hijacked by over zealous Big Four accounting firms. They were so Draconian in their approach to audits that they made this legislation about fear and busy work. They cared little for the true spirit of the legislation - report fairly and accurately to the investing public.
The reporting analytical framework used by most US registrants is called COSO (Committee of Sponsoring Organizations). There are essentially two frameworks, both centering around a "Risk Based" approach to internal control over financial reporting.
This is a good thing if it is not taken too far. It is good to analyze the risk to an objective and consider the risks of errors in fraud in financial reporting. It is good to analyze risk in business.
But let us not forget that American innovation and business was founded on taking risks. Not all risks can be mitigated. Not all of them should be.
Risk has become the modern day "boogie man". We fear the risks. One company's risk is another's opportunity.
Let's keep risk in focus. Let's not make it the total focus of business and fear the Big Four and the SEC so much that revenue suffers. Then you really have risk - the risk of going out of business because you were too risk averse.
Let's not become a nation of businesses, with only a "Risk and Cost Focus, with a Fear Chaser". Let's remember where we came from and keep this in perspective. Risk is to be analyzed and dealt with but it should not rule our worlds.
The Big Four perform a service, let's not let them dictate good entrepreneurial business practices. That is not their job nor their expertise. That is the job of optimistic CEO's who have to "Take the Hill" when they see opportunity.
If your company has to comply with SOX 404 or MI 52-109, and wants to do it in a sensible and cost effective way, contact http://www.issuescentral.com/ for more information on Compliance Playbook® for companies based outside of Canada. For Canadian based companies, see http://www.compliancepartner.ca/ for more information on Compliance Partner™ from Thomson Carswell.
