November 15, 2008
Roll Back Sarbanes-Oxley: Huh?
I am a big fan of Newt Gingrich, former US Speaker of the House. I watch him frequently on Fox News. He is extremely intelligent and well reasoned. That is on most things. But Newt and I part company on Sarbanes-Oxley. Mr. Gingrich is now lobbying to roll back Sarbanes-Oxley. I am not sure if this is a paid engagement, but one wonders.
Mr. Gingrich stated on Fox News November 15, 2008 that he believed that rolling back Sarbanes-Oxley would help businesses grow. First of all, that is such a general statement, let's analyze that:
1. Only public companies face Sarbanes-Oxley and only companies over $75Million in market capitalization have had to undergo 404 (b) external auditor atttestation. While these companies are approximately 90% of market cap, they represent about 5% of the total listings. So the larger volume of companies do not even face Sarbanes-Oxley because they are private and smaller companies have only done 404 (a) which is management's evaluation of internal controls.
2. I have personally worked with hundreds of companies in developing documentation for Sarbanes-Oxley and Canada's version NI 52-109 and it is clear that companies need to do this type of work. Most companies have flaws in their internal financial reporting processes that lead to fraud and errors. In many companies, this is not a theory, this is reality.
3. Just because there is a possibility that management can override controls and Sarbanes-Oxley cannot prevent this is not a reason to repeal it. Companies had not been managing internal controls and the fact that restatements went way up after Sarbanes-Oxley is an indication that there were problems.
4. Arguing against internal controls is the equivalent of arguing against honesty and integrity. In these times of an obvious lack of integrity on the part of many large companies, we really do not need to relax regulations that encourage strong internal controls.
Referencing a blog entry on this: The answer is, we need to keep Sarbanes-Oxley in place. When we can assure that all public companies will operate with total integrity, we can roll back Sarbanes-Oxley.
If your company has to comply with SOX 404 or NI 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 at http://www.issuescentral.com. For Canadian based companies, see http://www.compliancepartner.ca/ for more information on Compliance Partner™ from Thomson Reuters. For IFRS Transition products, see http://www.ifrspartner.com from Issues Central.
Mr. Gingrich stated on Fox News November 15, 2008 that he believed that rolling back Sarbanes-Oxley would help businesses grow. First of all, that is such a general statement, let's analyze that:
1. Only public companies face Sarbanes-Oxley and only companies over $75Million in market capitalization have had to undergo 404 (b) external auditor atttestation. While these companies are approximately 90% of market cap, they represent about 5% of the total listings. So the larger volume of companies do not even face Sarbanes-Oxley because they are private and smaller companies have only done 404 (a) which is management's evaluation of internal controls.
2. I have personally worked with hundreds of companies in developing documentation for Sarbanes-Oxley and Canada's version NI 52-109 and it is clear that companies need to do this type of work. Most companies have flaws in their internal financial reporting processes that lead to fraud and errors. In many companies, this is not a theory, this is reality.
3. Just because there is a possibility that management can override controls and Sarbanes-Oxley cannot prevent this is not a reason to repeal it. Companies had not been managing internal controls and the fact that restatements went way up after Sarbanes-Oxley is an indication that there were problems.
4. Arguing against internal controls is the equivalent of arguing against honesty and integrity. In these times of an obvious lack of integrity on the part of many large companies, we really do not need to relax regulations that encourage strong internal controls.
Referencing a blog entry on this: The answer is, we need to keep Sarbanes-Oxley in place. When we can assure that all public companies will operate with total integrity, we can roll back Sarbanes-Oxley.
If your company has to comply with SOX 404 or NI 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 at http://www.issuescentral.com. For Canadian based companies, see http://www.compliancepartner.ca/ for more information on Compliance Partner™ from Thomson Reuters. For IFRS Transition products, see http://www.ifrspartner.com from Issues Central.
